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Could Indian Gold Demand Return Gold’s Luster in H2 2018?


Sep. 13 2018, Updated 2:30 p.m. ET

Indian gold demand

The demand for gold in India (INDA) for most of 2018 has been muted. While gold prices (GLD) have fallen, Indian investors haven’t been able to take full advantage of the fall. Along with declining gold prices, the Indian rupee has also lost value against the US dollar (USDU). This has made gold more expensive in the local currency terms, stifling its demand.

According to the World Gold Council (or WGC), overall gold demand in India in the second quarter reached 187.2 tons, compared to 202.6 tons in the second quarter of 2017.

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Demand expected to pick up

However, the second half is expected to be better for physical gold demand in India. Usually, this demand picks up in India from September onward as the harvest and wedding seasons provide support. 

Gold imports in India have doubled in August year-over-year (or YoY). While India imported 41 metric tons of gold in August 2017, this figure more than doubled to 92 metric tons in August.

Seasonally strong period

The increased demand for gold is most likely due to the seasonally strong period for the precious metal in India. The festival season is around the corner, and jewelers are stocking ahead of the heavy demand season. This demand is expected to peak around November when Diwali occurs this year.

WGC also expects the metal’s largest physical buyers, China (FXI) and India (INDA), to continue to support gold prices through their strong demand for the rest of the year. Depreciation of the yuan has supported investment demand for gold in the second quarter, which is expected to continue in the third quarter. The council also expects Indian buying to pick up due to the traditional buying period.


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