India’s gold demand will continue to grow after big jump in 2021: World Gold Council

Somasundaram PR, regional chief executive of WGC’s India operations, told Reuters that gold consumption in 2022 will be 800-850 tonnes versus 797.3 tonnes last year, the highest in six years.

Indian demand has averaged 769.7 tonnes in the last 10 years.

An increase in consumption by the world’s second largest gold consumer will help global prices, but could widen India’s trade deficit and put pressure on the ailing rupee.

“Due to the restrictions, silent marriage ceremony means more savings and that money is flowing into gold,” Somasundaram said.

He said that Indian authorities imposed many restrictions on wedding ceremonies due to the outbreak of coronavirus and some people postponed the weddings till 2022.

Gold is an essential part of the bride’s dowry in India and is also a popular gift from family and guests at weddings.

In a report published on Friday, the WGC said that in the December quarter, gold consumption nearly doubled to a record 343.9 tonnes from a year ago, as retail buying was strong during the major Hindu festivals Dussehra and Diwali.

Somasundaram said weddings in 2021 spurred demand in urban areas, while rural demand was supported by ample monsoon rainfall, leading to increased crop production.

He said that there is more acceptance from Indian consumers at the current price level.

After hitting a record high of Rs 56,191 in August 2020, local gold prices were trading around Rs 48,000 per 10 grams this week.

The WGC said the demand for coins and bars, known as investment demand, rose 43% to 186.5 tonnes in 2022.

“We expect investment demand in India to remain strong till 2022. This may be supported by higher inflation expectations and a possible weakness in the rupee on account of a widening trade deficit,” it added.