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Demand for gold in India rises by 43% in Q2 of 2022, down 8% worldwide

Mumbai, July 28, 2022

Demand for gold in India in the second quarter (Q2) of 2022, ended June, rose by 43 per cent to 170.7 tonnes (t) as compared to 119.6t in the same period of 2021 even as gold demand worldwide, excluding OTC, was down 8% year-on-year to 948t.

However, thanks to strong ETF inflows in Q1, world gold demand for the first half of 2022 was up 12% as compared to H1 2021 at 2,189t, the latest Gold Demand Trends report from the World Gold Council (WGC) said.

The trends showed that the value of India's Q2 gold demand was Rs 79,270 crore, an increase of 54% in comparison with Rs 51,540 crore in Q2 2021.

Total jewellery demand in India for Q2 2022 was up by 49% at 140.3t as compared 94t in Q2 2021. The value of jewellery demand was Rs 65,140 crore, a rise of 60% from Rs 40,610 crore in Q2 2021.

Total Investment demand for Q2 2022 increased by 20% at 30.4t in comparison with 25.4t in the same quarter of last year. In value terms, gold investment demand was Rs. 14,140 crore, up by 29% from Q2 2021 (Rs. 10,930 crore).

Total gold recycled in India in Q2 2022 was 23.3t, as compared to 19.7 tonnes in Q2 2021, an increase of 18%, the report said.

Total gold imports in India in Q2 2022 was 170 tonnes, as compared to 131.6 tonnes in Q2 2021, an increase of 34%.

Somasundaram PR, Regional CEO, India, World Gold Council said: "India’s gold demand for Q2’ 22 left behind the anxiety caused by the pandemic in Q1 and marked by festivals and wedding buying, grew 43% YoY to 170.7t. Akshaya Tritiya coupled with traditional wedding buying spurred jewellery demand by 49% to 140.3t, though on a low base as Q2 of last year was impacted by a devastating second wave of COVID. Total jewellery demand for H1 reached 234t which 6% higher y-o-y. Gold investment i.e., bar, and coin demand in Q2 was of 30t which is 20% higher y-o-y, whereas H1’ 22 demand of 72t at 11% stronger y-o-y. Gold demand drew support from volatility in equity markets and inflation expectations.

"Going into H2’22, jewellery demand in India faces downside risks, due to uncertainty over the economic outlook, a higher import duty and the possibility of additional curbs on gold buying, even if for temporary and tactical reasons with an eye on INR-USD exchange rate. Upside potential for demand can come from expectations of a normal monsoon, higher inflation and the possibility for rangebound prices.

"Even as demand makes a recovery towards near-normal, the Indian bullion market is altering with some fundamental structural reforms such as mandatory hallmarking and exchange trading. The proposed launch of the India International Bullion Exchange will kick-start a journey to make India a trusted and efficient trading hub and extend its influence in the global bullion markets.

"An efficient price discovery for bullion, responsible and sustainable sourcing, world class trading and vaulting infrastructure at GIFT City and an agile regulatory framework with IFSCA, IIBX is bound to emerge as a credible global entity in the bullion industry. As the importance of bullion rises in an uncertain world, a trusted eco-system underpinned by IIBX will offer a global advantage to investors in gold. India’s efforts to monetise gold will also derive tremendous support from a transparent bullion trading system in GIFT City," he added.

Worldwide, the report said that, after an initial rally in April on geopolitical risks and building inflationary pressure, the gold price dropped in the second quarter of 2022 as investors shifted their focus to rapidly rising interest rates and a strikingly strong US dollar.

The 6% decline in the gold price over the quarter impacted gold ETFs, which saw outflows of 39t in Q2. Net H1 inflows totalled 234t, compared to 127t of outflows in H1 2021. However, the Q2 decline likely sets a weaker tone for ETFs in H2, given a potentially softening inflation outlook amid continued rate rises, it said.

Gold bar and coin demand remained stable year-on-year at 245t in Q2. Growth in demand came notably from India, the Middle East, and Turkey which helped to balance weakness in Chinese demand that was partially driven by continued coronavirus lockdowns. As a result, there was a 12% year-on-year decline in global bar and coin demand to 526t in H1.

In the jewellery sector, Q2 gold demand increased 4% year-on-year to 453t, helped by a recovery in Indian demand, up 49% compared with Q2 2021. The strong performance in India balances a significant decline of 28% in China, where the market was dampened by coronavirus lockdowns that stalled economic activity and constrained consumer spending.

Central banks were net buyers in Q2, growing global official reserves by 180t. Net purchases reached 270t in H1, aligning with the results from our recent central bank survey, in which 25% of respondents said they intended to increase their gold reserves in the next 12 months.

Turning to the technology sector, demand for gold was down 2% from Q2 2021 at 78t, and as a result, H1 2022 demand was marginally lower year-on-year at 159t. The electronics sector has continued to experience supply chain disruption, and is now facing diminished consumer appetite for electronics as the cost-of-living crisis starts to bite; both of which influenced this slight drop in demand.

The report said mine production for the first half of the year hit record highs in the Gold Demand Trends data series reaching 1,764t, up 3% on H1 2021. Production was boosted by some projects mining higher grade deposits and the Chinese mining industry returning to normal output levels after safety stoppages last year. Elevated gold prices in Q1 and increasing economic hardship and uncertainty led to an uptick in recycling activity, with total H1 recycling reaching 592t, 8% higher year-on-year.

Louise Street, Senior Analyst EMEA at the World Gold Council, said: “In the first half of 2022, the global gold market was supported by macroeconomic factors such as rampant inflation and geopolitical uncertainty, but it also faced headwinds from rising interest rates coupled with an almost unprecedented surge in the value of the US dollar. And while we have seen prices ease from exceptionally high levels in Q1, gold has been one of the best performing assets so far this year.

“Looking ahead, we see both threats and opportunities for gold in H2 2022. Safe haven demand will likely continue to support gold investment, but further monetary tightening and continued dollar strength may pose headwinds. As many countries face economic weakness and the cost-of-living crises continues to squeeze spending, consumer driven demand will likely soften, although there should be pockets of strength," she added.


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