Q1 2024 saw healthy levels of gold bar and coin investment in India, up 19% y/y at 41t. This was on a par with Q1 2022, which was itself the strongest first quarter since 2014.
In a repeat of the pattern seen in India during Q4’23, demand was sparked by the price correction in February, which investors expected would be temporary and would presage a rebound. The subsequent sharp price rally reaffirmed those positive price expectations. Investors bought into the rally as the price reached successive record highs, anticipating a continued uptrend.
The strength in bar and coin investment echoed sentiment elsewhere in India’s gold market. ETFs saw positive Q1 inflows (+2t), and two new funds were launched during the quarter, indicating continued growth in these products.
While investor sentiment towards gold remains positive, the domestic general election, which runs from April to June, may keep demand subdued. Data shows that gold consumption tends to decline ahead of such elections, particularly as there is greater scrutiny on the movement of gold and cash.
Any further sharp rises in the gold price could present a short-term headwind by sparking profit-taking and may result in a reduction in volumes purchased due to affordability constraints.
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