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- India Investments 2024: GOLD
India Investments 2024: GOLD
WHERE INDIANS ARE INVESTING IN 2024
PART 1: GOLD
India's affinity for gold remains unwavering, with the precious metal serving as a symbol of wealth, status, and cultural significance. In 2024, despite record-high prices, Indians continued to strategically invest in gold through different avenues. 💰
In part 1 of the series, ’Current Investments Trends Amidst Elections’, we delve into the gold investment landscape of India in 2024, 📊 examining the different modes of investment, key trends, and the factors driving demand.
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🚀 GOLD DEMAND SURGES AMIDST RISING PRICES
According to the World Gold Council (WGC), 🔺 India's gold demand rose by 8% in the first quarter of 2024 compared to the same period in 2023, reaching 136.6 tonnes. 💹 This growth occurred despite gold prices touching historic highs, with the average quarterly price in Q1 2024 standing at INR 55,247.20 per 10 grams (without import duty and GST), a 10.62% increase from Q1 2023. 🤯
Takeaway: 🛟 Gold is still a safe-haven asset given the current economic and political uncertainties arising from India’s biggest election year and geopolitical tensions. 🟡 Gold's historical stability makes it a valuable hedge against such risks. 🎉 Another key driver that has helped defy previous trends is India’s robust macroeconomic environment providing a supportive backdrop for gold consumption, despite price surges.
💎 The jewellery demand, which accounts for a significant portion of India's gold consumption, grew by 4% to 95.5 tonnes in Q1 2024. ⚡️ Meanwhile, investment demand, including bars and coins, surged by 19% to 41.1 tonnes. 📈 The value of gold demand rose by an impressive 20% in this quarter with jewellery demand and investment demand going up by 15% and 32% respectively.
Takeaway: Indians view 🏦 gold as a secure investment and 🕉️ a cultural symbol keeping demand resilient despite record-high prices. Gold price surges have impacted jewellery consumption demand, slowing it down. However, the same reason has 💪 bolstered investment demand in anticipation of further increases in prices.
🤑 SHIFTING INVESTOR BEHAVIOUR
Historically, Indian investors have been price-sensitive, increasing their gold purchases when prices dip. 🌀 However, 2024 witnessed a reversal in this trend. As gold prices rallied to record highs, Indian investors remained bullish, 🐂 contributing to enduring demand. This shift in behaviour aligns with the trend observed in other Asian markets, such as China.
Takeaway: Q1 2024 trend reversal in investor buying behaviour indicates a growing recognition of 👛 gold's value as a hedge against inflation and uncertainty. 🌴 More Indians are utilizing gold as a portfolio diversifier to reduce overall risk potential and enhance returns. ⚖️ By including gold, India could be aiming for a more balanced investment strategy.
The Reserve Bank of India (RBI) played a significant role in driving gold demand in 2024. 🏦 The central bank added 19 tonnes of gold to its reserves in the first quarter alone, exceeding its total purchases of 16 tonnes in the entire year of 2023. 🛍️ The RBI's aggressive buying, along with purchases by other central banks worldwide, supported the surge in gold prices and boosted investor confidence.
Takeaway: RBI is planning ahead by building strategic gold reserves to provide a buffer during economic downturns or emergencies. ⛰️ Also, this signals confidence in gold as a valuable reserve asset.
🟡 GOLD-BACKED ETFs GAIN TRACTION
In addition to physical gold, Indian investors increasingly turned to gold Exchange Traded Funds (ETFs) to hold gold electronically. Gold ETF investments saw positive inflows of over 2 tonnes in Q1 2024, with the assets under management (AUM) of these funds reaching INR 312.2 billion, a 9% increase from the previous quarter.
Takeaway: Demand for ETFs has shown slow but sustained growth, indicating the 🌅 rising popularity of alternative gold investments. A new generation of tech-savvy Indian investors is increasingly preferring to hold gold through convenient and fractional instruments while 💧 maintaining easy asset liquidity.
♻️ RECYCLING AND IMPORTS
The rising gold prices also led to increased gold recycling. 🚴 In Q1 2024, the total gold recycled in India stood at 38.3 tonnes, a 10% increase from Q1 2023. However, reports highlight limited instances of distress selling, indicating the strong holding sentiment among Indian households.
Takeaway: A low range of gold recycling instances is indicative of some 🫰 profit-booking at high prices, but this was not done to a significant extent. Indians are not eager to liquidate gold holdings any time soon.
Gold imports in Q1 2024 reached 179.4 tonnes, a 25% increase compared to the same period in the previous year. This growth in imports highlights the robust demand for gold in the country, despite the higher prices.
Takeaway: Despite increase in imports, there were 📊 remarkable fluctuations in gold imports throughout the first quarter. 🤔 Lower demand for fresh imports was likely caused by price surges, lower jewellery demand, and a higher flow of recycled gold compared to the same period last year.
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🔼 FACTORS DRIVING GOLD DEMAND
Several factors have contributed to the sustained gold demand in India during 2024:
Economic Uncertainty: 🤷♂ Geopolitical tensions and concerns about a potential global recession drove investors towards safe-haven assets like gold.
Inflation Hedge: 🛡With rising inflation rates, gold served as a hedge to protect wealth and preserve purchasing power.
Cultural Significance: 🪷 Gold's deep-rooted cultural significance in India, particularly its association with weddings and festivals, continued to drive demand.
Lack of Alternative Investments: 💱 Limited attractive investment options in other asset classes further fueled the appetite for gold.
👊 THE IMPACT
India's changing trends in gold investments are expected to have a multifaceted impact. On the economic front, they will likely influence the gold price, both, domestically and internationally. Also, these investments will contribute to India's financial security by providing a hedge against economic uncertainties.
🌄 GOLD OUTLOOK 2024 & BEYOND
Akshaya Tritiya, a key gold-buying occasion that fell on 10 May this year, was marked by lower-than-expected volume in demand. 😞 Most sales were token purchases for coins 🪙 rather than jewellery due to gold prices still hovering around record-high numbers, 📈 a 21% increase compared to prices last year during the festival.
The ongoing general elections and the associated restrictions 🗳️ on the movement of cash may temporarily dampen sales. Other contributing factors such as monsoon patterns, economic growth, and gold price volatility will also play crucial roles in shaping gold demand in India for 2024.
Potential for Post-Lull Demand Resurgence: The current high gold prices and upcoming elections might dampen demand in the coming months. However, festivals, weddings, and a positive monsoon outlook could generate resurgence in demand for gold in HY2 2024.
Full-Year Demand Forecast: The World Gold Council forecasts India's full-year gold demand to be between 700-800 tonnes. However, if the price rally continues, demand could settle at the lower end of this range.
Looking ahead, the long-term outlook for gold demand in India remains positive. 🇮🇳 With a growing economy, rising disposable incomes, and the persistent cultural significance of gold, India is likely to maintain its position as one of the world's leading gold consumers.
Key Takeaways:
India's gold demand rose by 8% in Q1 2024, despite record-high prices.
Jewelry demand grew by 4%, while investment demand surged by 19%.
Indian investors displayed a shift in behavior, buying gold even as prices rallied.
Central bank purchases, particularly by the RBI, contributed to the demand surge.
Gold ETFs and digital gold platforms gained popularity among investors.
Recycling activities increased, but distress selling remained limited.
Economic uncertainty, inflation concerns, cultural significance, and lack of alternative investments drove gold demand.
India's gold demand in 2024 is projected to range between 700 to 800 tonnes.
The long-term outlook for gold demand in India remains positive, supported by economic growth and cultural factors.
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In the run up to the general elections, India's gold investments in 2024 show the country's continued faith in the precious metal, even in the face of record-high prices. Q1 2024 has witnessed robust demand across the gold industry with Indians exploring avant-garde channels like physical gold, ETFs, and digital gold, to achieve a balanced and strategic investment approach.
As the South Asian giant navigates through economic uncertainties and cultural traditions, gold is likely to remain an integral part of its investment landscape, cementing its position as one of the world's most important gold markets.
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