Jewellery demand is expected to gradually recover from mid-January, primarily driven by wedding purchases, according to a World Gold Council (WGC) report. Demand, however, will be favourably influenced by gold price stability. The recent trend in investment demand is expected to continue, the report said.
Consumers have been hesitant about buying gold jewellery due to high and fluctuating prices and the inauspicious period in the Hindu calendar, which runs from mid-December to mid-January. Buying has primarily been wedding-related. But anecdotal market reports tell us that physical investment demand for bars and coins has been sustained, emphasising gold’s investment appeal.
The subdued demand environment was reflected in the spread between domestic and international prices. Since December domestic gold prices have traded at a discount to global prices; discounts averaged US$4/oz and have recently widened to US$15/oz.
Despite a price moderation in November and December, gold emerged as the top-performing asset class in India, posting y/y gains of 21%1 in 2024. However, gold’s return in INR was lower than its 26 per cent return in USD term.
In December gold extended the decline: dropping 2% after a 4% decrease in November and closing at US$2,610/oz. This decline can largely be attributed to the strong rally in the US dollar. Limiting the slide were a persistent and growing geopolitical risk, and a positive trend in global gold ETF flows. In the domestic market, amid price fluctuations, gold closed December 0.4% lower at INR76,328/10g.
Gold has started 2025 on a strong note, rising 2.7% to US$2,679/oz as of 10 January, partly recouping the losses of the previous two months. Global uncertainties continue to support prices. There has been a similar increase in INR terms too (to INR78,360/10g).
Indian gold ETFs experienced their eighth consecutive month of net inflows in December, although at their lowest level since June 2024. The decline in gold prices during the month likely impacted the momentum seen previously. However, ongoing volatility in equity markets, coupled with the general bullish sentiments surrounding gold, continued to support investor demand. According to the Association of Mutual Funds in India (AMFI), gold ETFs recorded net inflows of INR6.4bn (US$75mn) in December, reflecting a nearly 50% decline from the previous month and 32% lower than the average monthly inflows of INR9.4bn (US$112mn) for the year.
Investor demand for gold ETFs surged in 2024, attracting net inflows of INR112bn (US$1.3bn), the strongest annual inflow on record and nearly four times higher than the previous year. Assets under management (AUM) grew by 63% y/y, reaching INR446bn (~US$5.2 bn). In total, 15t were added to gold holdings during the year, bringing the collective holdings to 57.8t and marking a 35% y/y increase. Furthermore, three new gold ETFs were launched in India during the year, bringing the total number of physically-backed funds available in the local market to 18.
The strong momentum in gold prices, global uncertainties, favourable tax revisions in the Union Budget in July, volatility in domestic equity markets, and the inherent transparency, liquidity and ease of transactions have collectively driven investor interest towards ETFs. A spike in inflows into multi-asset funds, which invest in gold ETFs, has contributed. These funds saw their net inflows nearly double to INR425bn (US$5.1bn), with the market value of their gold ETF investment increasing by 97% y/y.
