Demand for jewelry is now back to pre-pandemic levels: World Gold Council

• Ask for gold in India during the September quarter of the current calendar year, it grew by 14% year-on-year.
  
• Healthy jewelery demand in India can be attributed to a strong rebound in economic activity, up 17% year-on-year in terms of tonnage.
  
• Restore in gold jewelry demand was mainly driven by urban India, more specifically the southern parts of the country.
  

India’s love of gold remains strong, with both jewelry demand and investment growing at double digits in the September quarter of this year. According to the World Gold Council‘s quarterly report, demand for the yellow metal in India grew 14% year-on-year to 191.7 tons during the September quarter of the current calendar year. In terms of value, gold demand was ₹85,010 crore, an increase of 19% compared to the corresponding quarter last year.

For the full year, the World Gold Council expects demand for the yellow metal to average around 750-800 tons, comparable to last year.

Demand for gold from central banks remains strong despite the price decline through 2022, while the dollar strengthened against all other currencies. The strength of the dollar has impacted the value of asset classes and gold is just one of them. In India, demand for ornaments has made a strong comeback this year after weak demand after Covid.

According to Somasundaram PR, India Regional CEO, World Gold Council: “India’s total demand for gold in the third quarter of 2022 at 191.7 tons is an increase of 14% from last year. This reflects better-than-expected performance and strong consumer interest, returning demand from year to date to pre-Covid levels.”

The recovery in demand for gold jewelry was mainly driven by urban India, more specifically the southern parts of the country. Healthy jewelery demand can be attributed to a strong rebound in economic activity, with a 17% year-on-year increase in tonnage. Rural India which is a major consumer of gold, however, has played no role in the recovery in demand due to the seasonal effect (monsoons) and inflation.

Gold bars and coins were also in demand during this period, growing 6% year-on-year to 45.4 tons as retail investors reacted to gold price decline and weaker stock markets, and festivities around Ganpati and Puja festivals after two years of Covid, saw a huge surge in consumer confidence, the World Gold Council report says.

In India, total investment demand was 45.4 tons in the September quarter, an increase of 6% compared to the corresponding quarter last year. In terms of value, demand for gold investment in the September quarter was ₹20,150 crore, up 10% from the previous year. Total gold recycled in India in Q3 2022 was 16 tons, down 23% from 20.7 tons in 2021.

Global Gold Consumption Trends


Global demand for gold as a store of value also increased, but investors of gold exchange traded funds (ETFs) became cautious. According to the report from the World Gold Council, private investors bought gold as a store of value amid rising global inflation, while ETF investors reduced their positions in the face of rising global interest rates.

Demand for gold was also seen in the Middle Eastwith Saudi Arabian jewelry consumption up 20% since the third quarter of 2021, and the United Arab Emirates up 30% over the same period.

Chinese jewelry demand also saw a modest 5% year-on-year increase as a result of improved consumer confidence and a decline in the local gold price, leading to the release of pent-up demand.

Central bank purchases also rose during the quarter with estimated record purchases of nearly 400 tons in the third quarter.

“Looking ahead, we expect central bank buying and retail investment to remain strong and that could help offset potential declines in OTC and ETF investment that may prevail if dollar strength continues. We also expect jewelry demand to continue to perform strongly in some regions such as India and South East Asiawhile the technology sector is likely to decline further in light of the economic slowdown,” said Louise Street, Senior Markets Analyst at the World Gold Council.

Gold continued to favor private investors who turned to gold for its status as a store of value against inflation and geopolitical uncertainty.

Investors tried to hedge inflation with investments in bars and coins, increasing aggregate retail demand by 36% yoy. This was supported by significant purchases in Turkey (+5x) and in Germany (+25%). According to World Gold Council estimates, there were ‘visible contributions’ in all major markets.

Mining production also rose 2% from the third quarter of 2021, with gold mining experiencing its sixth consecutive quarter of growth. By contrast, recycling was 6% lower year-on-year in the third quarter as consumers held on to their gold in the face of rising inflation and uncertain economic prospects.

“Despite a shaky macroeconomic environment, demand this year has reflected gold’s safe-haven status, underlined by the fact that it outperformed most asset classes in 2022,” said Louise Street.

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