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India gold demand surges in 2021, jewellery purchases almost double: World Gold Council

The spurt in demand in Q4 is less likely to be repeated in 2022, though the revival will continue to set a new normal above pre-pandemic levels, the WCG said

January 28, 2022 / 06:15 PM IST
Representative image

Representative image


Gold demand in India overcame pandemic woes to stage a remarkable recovery, surging 79 percent in 2021 on the back of pent-up purchases in the last quarter of the year.

Demand for the precious metal climbed to 797.3 tonnes last year from 446.4 tonnes in 2020, the World Gold Council said in a report on January 28.

“India’s gold demand recovered by 79 percent, chiefly a result of an exceptional Q4 demand of 343 tonnes that surpassed even our most optimistic expectation articulated in Q3 and turned out to be the best quarter in our recorded data series,” said Somasundaram PR, regional CEO, India, World Gold Council.

Gold demand in September-December increased 85 percent from 186.2 tonnes a year earlier.

Gold jewellery demand almost doubled in 2021, surging past pre-pandemic levels to reach a six-year high of 610.9 tonnes, an increase of 93 percent from 315.9 tonnes in the previous year. Jewellery demand in the fourth quarter rose 93 percent over the same period a year ago to 265 tonnes, fuelled by weddings and the festival season.

The value of jewellery demand in India rose to Rs 2,61,140 crore in 2021, up 96 percent from a year ago.

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Gold imported into India more than doubled to 924.6 tonnes from 349.5 tonnes in 2020. Gold imports in Q4 rose 25 percent to 208.4 tonnes.

“With the easing of lockdown restrictions in H2 and a successful progress of the vaccination programme, economic growth altered consumer sentiment significantly, triggering spending and investments across the board during Dussehra and Dhanteras. This marked a remarkable recovery with many retailers reporting record sales volumes, above even those of pre-pandemic levels and imports and exports rising in tandem,” Somasundaram said.

Gold investment demand in Q4 also surged to an eight-year high of 79 tonnes. The total investment demand for the year was up 43 percent to 186.5 tonnes.

According to Somasundaram, Covid-19 and future variants of the coronavirus will remain a factor to watch in 2022, as will gold price movements, given the global concerns over inflation, interest rates and geo-political developments.

“The spurt in demand that is, in part, a result of pent-up demand in Q4, is less likely to be repeated this year, though the revival will continue to set a new normal above pre-pandemic levels. The next few years starting with 2022 will be years to watch for the effect of policy reforms, technology and industry collaboration to let gold evolve into a more transparent mainstream asset class,” Somasundaram said.

Gold recycled in India dropped 21 percent to 75.2 tonnes from 95.5 tonnes in 2020, while it was 20 tonnes in Q4 from 21.7 tonnes a year earlier.

World Demand

Global gold demand for 2021, excluding over-the-counter trades, increased to 4,021 tonnes, propelled by Q4 demand that jumped almost 50 percent to a 10-quarter high of 1,147 tonnes. Demand recouped most of the pandemic-related losses sustained during 2020. Demand for gold in the consumer-driven jewellery and technology sectors recovered throughout the year, in line with economic growth and sentiment, while central bank buying far outpaced that of 2020.

Gold bar and coin demand rose 31 percent to an eight-year high of 1,180 tonnes as retail investors sought a safe haven amid rising inflation and ongoing economic uncertainty caused by the pandemic.

The WGC reported outflows of 173 tonnes in 2021 from gold-backed exchange-traded funds as investors reduced hedges early in the year amid vaccine rollouts and rising interest rates that made holding gold more expensive. These outflows represented only a fraction of the 2,200 tonnes that gold ETFs have accumulated over the preceding five years, demonstrating the continuing importance investors place on including gold in their portfolio.

The jewellery segment rebounded to match the pre-pandemic total of 2,124 tonnes in 2019. This too was aided by a strong Q4, with demand reaching its highest level since Q2 of 2013, when the price of gold was 25 percent lower than the average comparative price in 2021, further highlighting the strength of demand in the most recent quarter.

For the 12th consecutive year, central banks were net purchasers of gold, adding 463 tonnes to their holdings, which was 82 percent higher than in 2020. A diverse group of central banks, from both emerging and developed markets, added to their gold reserves, lifting the global total to an almost 30-year high.



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PK Krishnakumar is a journalist based in Kochi.
first published: Jan 28, 2022 06:15 pm
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