India's gold market is showing signs of a recovery that could strengthen further during the upcoming festive season, with improving jewellery demand, steady investment interest and a rebound in imports pointing to firmer market conditions, according to the World Gold Council's latest India Gold Market Update.
While elevated prices could continue to influence jewellery purchases, investment demand is expected to remain supportive. Gold prices have regained ground after a sharp correction in June and a period of stability in July. International gold prices rose 9 per cent in the first two weeks of August to $4,391 per ounce, while domestic prices gained nearly 7 per cent to ₹1,51,744 per 10 grams as of August 14.
The recovery was supported by shifting monetary policy expectations, a weaker US dollar and renewed inflows into gold exchange-traded funds (ETFs). The improvement in prices has coincided with a recovery in physical demand. Jewellery demand strengthened as consumers viewed recent price movements as an opportunity to buy, while deferred purchases returned to the market.
Manufacturers also reported higher order flows, with jewellers increasing inventory ahead of the festive season.Investment demand remained supportive despite moderating from the elevated levels seen earlier in the year. Indian gold ETFs recorded net inflows of ₹1,560 crore in July, although this was 55 per cent lower month-on-month.
ETF holdings increased by 1 tonne to 120 tonnes, while assets under management rose 2 per cent to ₹1,73,300 crore. In the first two weeks of August, ETFs attracted an estimated additional ₹1,179 crore of net inflows.Trading activity in gold futures also improved in July.
Average daily volumes on the Multi Commodity Exchange of India rose to 14.9 tonnes, from 13.5 tonnes during the previous three months, while average daily turnover increased 9 per cent month-on-month to ₹21,400 crore. Gold imports provided another indication of improving demand.
Import value more than doubled in July to $4.16 billion, from $1.97 billion in June, while estimated import volumes increased to 40-45 tonnes from around 20 tonnes. The World Gold Council said the rebound reflected stronger physical demand and inventory replenishment by manufacturers and retailers ahead of the festive season.
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