India’s gold market update: Anticipating a festive boost

Festive auspicious buying and bullish sentiment support gold demand

Despite record high prices, consumer buying during Diwali was strong in both gold jewellery and bars and coins.⁵ Markets and media reported higher footfall at jewellery stores and robust buying of coins via online as well as offline platforms. Promotional events and marketing campaigns undertaken by jewellers to lift sales.⁶ The price increase since Diwali 2023, has enhanced consumer sentiment, positioning it as a long-term investment. And volatility in domestic equity markets, coupled with rising international prices, has added to gold's investment appeal. Anecdotal reports suggest that auspicious 'token' purchases were rather broad-based, spanning regions and demographics.

Despite a y/y drop in the volume of gold sold,⁷ the value of sales increased, driven by the higher price.

Consistent demand for gold ETFs

Indian gold ETFs continued to attract strong inflows in October, fuelled by a favourable gold price momentum and increased volatility in domestic stock markets. The long-term capital gains treatment for gold, which was announced in July, has provided a continued boost, as reflected in the significant rise in inflows since that time.

From July to October monthly average net inflows into Indian gold ETFs reached INR15.4bn/US$183mn, a significant increase from the average of INR5.3bn (~US$63mn) in the first half of the year. According to the Association of Mutual Funds in India (AMFI), October saw record net inflows of INR19.6bn (~US$233mn), pushing the total assets under management (AUM) for Indian gold ETFs to a new high of INR445bn(~US$5.3bn). This represented a 12% m/m and a 70% y/y increase. Over the first 10 months of 2024 total net inflows into Indian gold ETFs reached INR93bn(~US$1.11bn), a substantial rise from INR25bn($301mn) during the same period last year. These funds have collectively added 12.2t of gold to date in 2024, bringing their total gold holdings to 54.5t and representing a 32% y/y growth.