Gold is back in the news in India, the second-largest consumer market in the world.
Gold prices have been moving upward, buoyed by several conditions, since January.
On Feb. 6, for example, retail gold prices touched approximately U.S. $461 (Rs 33,000) per 10 grams in Mumbai and over U.S. $474 (Rs 34,000) in Ahmedabad, nearing new all-time record highs. This was in contrast to prices in London, which held flat in U.S. dollar terms.
Gold prices globally on the same day held firm after U.S. President Donald Trump’s State of the Union address, but a firmer dollar stopped the bullion’s gains. Spot gold was steady at $1,314.30 per ounce in intraday trading. U.S. gold futures were also steady at $1,318.20 per ounce.
Any rise in consumption by India is welcome, as it will push up global prices currently near an eight-month high.
Gold analysts anticipate a rise in India’s gold demand this year. The World Gold Council (WGC) recently said prices could go above the 10-year average.
The WGC estimated consumption this year in India would go up to 750-850 tons versus 760.4 tons of last year, according to Somasundaram PR, managing director of WGC’s Indian operations, as quoted in The Economic Times.
If one were to look at the consumption data of the last decade, demand by Indian consumers has averaged 838 tons.
What may push up gold consumption is more purchasing power in the hands of Indians this election year, as the present government unveils policies with an eye on the polls.
Much of this growth is anticipated from the country’s rural sector. Almost all of India’s gold is imported, and this incoming movement has been affected by the Indian government’s efforts to restrain its trade deficit by measures to discourage investors who used gold to evade taxes.
In addition to this being an election year, the wedding season is another reason for the spurt in gold buying.