The World Gold Council (WGC) has released the latest statistics from India in regards to gold consumption and there has been a slight drop in retail demand. The WGC noted that retail demand remained sluggish as buyers postponed purchases in anticipation of a correction in the gold price.
In regards to prices, the domestic gold price ended 1.7% higher in March at Rs51,317/10g. This then widened the local market discount to US$60/oz during the month, compared to a discount of US$14-15/oz at the end of February. In addition to this, higher gold recycling also depressed official imports to 15.8t in March, 90% lower y/y and 80% lower m/m.
There was some good news in the report as India signed a Comprehensive Economic Partnership Agreement (CEPA) in February, which extends a 1% customs duty concession for up to 200t of bullion imported from the UAE. This is due to come into effect on 1 May 2022.
In terms of larger investment demand, Indian gold ETFs witnessed marginal net inflows of 0.2t in March, primarily driven by a correction in the gold price, which might have spurred investor interest, total holdings of gold ETFs were 36.4t. The Reserve Bank of India (RBI) added 2.4t of gold in March, increasing its total gold reserves to 760.4t.
Moving forward, retail demand could improve in April as consumers accept higher gold price levels. Demand will also receive support from the festival and wedding-related purchases during the month. Official imports could pick up due to restocking by the trade ahead of the Akshaya Tritiya festival on 4th May.