Indian gold demand remains firm

 Mumbai (Sept 21)  According to the World Gold Council, retail demand strengthened in August as the correction in the domestic gold price in August of 2.4% provided a fillip to demand in the first half of the month.

The report went on to say, retail demand strengthened during the month with a correction in the gold price and wedding purchases. Adding that official imports hit a five-month high in August and the local market flipped back to a premium. The domestic gold price ended 2.4% lower in August at Rs47,106/10g1 which could help demand stay firm.

Optimism regarding prospects for economic recovery, higher vaccination rates, and a 9.4% return on BSE Sensex led investors to divert money into equity. Encouragingly total holdings of gold ETFs remained at the same level of 34t by the end of August and the Reserve Bank of India (RBI) added 14.9t of gold in August, increasing its total gold reserves to 726.1t

When explaining the main focus on demand senior analyst Mukesh Kumar said "Following the improvement in July, retail demand strengthened in August. The correction in the domestic gold price on 9 August of 2.4% provided a fillip to demand in the first half of the month – largely driven by wedding purchases – although this tailed off slightly after the subsequent price recovery. Demand was also supported by buying on Onam, with anecdotal evidence suggesting an improvement y-o-y due to the low base of 2020 and improved consumer sentiment following the economic revival after the second wave of COVID-19.4 Based on interaction with the trade, large organized retailers reported 35–40% higher retail demand y-o-y in the month."

Lastly, the report noted, retail demand is expected to remain healthy in September with the correction in the gold price but may soften marginally with the onset of Pitru Paksha from 20 September considered an inauspicious period for gold purchases.

KitcoNews