Recently, Kavita Chacko, Research Head, India- World Gold Council- WGC wrote about, India’s gold market update: demand takes a breather following festival rush! Focussing on gold corrects from its recent all-time high but maintains yearly upswing point of view she explained, Gold rose to a new all-time high in mid-May before pulling back, likely on profit taking, to close the month at US$2,343/oz.
This delivered a 1% monthly increase, adding to gains in March (9%) and April (5%). The international price pulled back further in the first half of June (by 1% to US$2,317/oz) following a stronger-than-expected jobs market report in the US and a pause in reported gold purchases by the People’s Bank of China (PBoC).
Despite this, gold remains one of the best performing asset classes with a 12% return y-t-d. Indian domestic landed gold prices continue to closely shadow the movement of international gold prices thanks to the relative stability in the USD/INR.
The discount on the domestic gold price to international price has narrowed from those in March (US$24/oz) and April (US$10/oz) to US$6/oz as of mid-June. This decline in discount – even after Akshaya Tritiya – suggests that gold buying interest continues, in certain quarters, during what is typically a period of low demand.
Key takeaways from her India’s gold market update; are, 1: Global and domestic gold prices extended their streak of gains; up 12% y-t-d, 2: Demand softened after Akshaya Tritiya, 3: The discount between domestic and international gold prices narrowed, 4: The RBI has added 30.6t2 to reserves so far this year, taking total gold holdings to a record high of 834.2t, 5: Positive flows resumed into gold ETFs in May & 6: Gold imports have seen a consistent increase in May.
By looking ahead, Kavita shared two points,
1: We anticipate that jewellery demand will predominantly centre on the festival season starting in the latter half of Q3 &
2: Interest in bars and coins is expected to continue.
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