India has one of the largest markets for gold in the world. Despite this, gold demand for jewelry fell 30% for the country since the previous quarter yet demand for gold as an investment rose 52%.
Somasundaram PR, managing director for India at the World Gold Council, explained that the demand for gold jewelry between summer months tends to be relatively low, due to seasonal factors such as monsoons and inauspicious periods. Opposingly, gold jewelry demand usually rises in India in the months between October to December due to festivals such as Dussehra and Diwali, and because the period is popular for weddings. However, the recent drop in its demand can be attributed to the fact that many festivals and weddings were canceled due to the coronavirus pandemic which slashed growth prospects and left millions unemployed.
Some predict, however, that pent-up demand may surface in the current quarter. This uptick though is unlikely to offset full-year gold demand decline for India. Even though the overall demand for gold fell, investment demand for the commodity rose 21% as investors bought gold bars, coins and gold-backed ETFs. This stems from the fact that gold is seen as a safe investment to put money in when markets face uncertainties.
Overall, this supports the ideology that cautious optimism is warranted for the country’s position on gold.