Gold Demand in India Sees 5% Drop Amid Price Corrections and Import Duty Cuts

India witnessed a 5% decline in gold demand in the June quarter of 2024. The World Gold Council (WGC) attributes this to falling prices following a reduction in import duties. Expectations for the latter half of 2024 are optimistic due to better monsoons and increased rural consumption.

India's gold demand in the June quarter decreased by 5% compared to the previous year, according to the World Gold Council (WGC). However, a price correction resulting from recent import tax cuts is set to boost consumption in the latter half of 2024.

Higher gold purchases in the world's second-largest consumer could support global prices, which are nearing record highs. The recent reduction in import duty, implemented before the main festival season starting in September, is expected to revive demand, bolstered by favorable monsoon rains, said Sachin Jain, CEO of WGC's Indian operations.

Last week, India slashed its gold import duties from 15% to 6%, lowering domestic prices and potentially increasing retail demand while reducing smuggling. The price drop brought gold down to 67,500 rupees per 10 grams, a four-month low.

Good monsoon rains typically increase food grain production and improve farmers' incomes, contributing to two-thirds of India's gold demand, which primarily comes from rural areas. Strong GDP forecasts and rural sector recovery are also expected to support demand in the second half of the year, according to Jain.

Gold consumption in the April-June quarter fell by 5% to 149.7 metric tons, mainly due to a 17% drop in jewelry demand, despite a 46% rise in investment demand. The demand could range between 700 and 750 metric tons in 2024, the lowest in four years.

Additionally, the Reserve Bank of India continued its gold purchases, adding 19 tons in the June quarter, totaling 37 tons for the year's first half, more than double the amount purchased in 2023, stated the WGC.