Gold has always found a special place among Indian consumers. In 2023, however, demand for the precious metal fell slightly as rising prices weakened consumer appetite, especially for gold jewellery.
Data from World Gold Council (WGC) shows total consumer gold demand in 2023 was at 747.5 tonnes, down 3 per cent from the 774.1 tonnes in 2022.
Jewellery demand, in particular, was down 6 per cent to 562.3 tonnes in January-December 2023 from 600.6 tonnes in 2022. On the other hand, investment demand rose 7 per cent to 185.2 tonnes last year from 173.6 tonnes in the previous year.
Somasundaram PR, Regional CEO, India, World Gold Council, says gold demand in the country is "strongly influenced" by rising gold prices.
"Although consumer interest remained high, it lagged trade sentiment. October's price correction during Navratri stimulated a robust consumer response, boosting Diwali sales in November. However, demand declined in December as gold prices resumed an upward trend, resulting in a 9 per cent drop in fourth quarter jewellery demand, compared to Q4 2022," he said.
Gold prices in India rose around 15 per cent in 2023. As India imports gold, price rises as the rupee depreciates against the US dollar. Global economic growth, demand trends in major countries also impact gold prices.
Net gold imports surged 20 per cent to 780.7 tonnes in 2023 from 650.7 tonnes in 2022, according to WGC.
Globally, total gold demand hit a new annual record high of 4,899 tonnes in 2023, a 3 per cent growth, compared with 4,751.9 tonnes in 2022. This was largely driven by demand in the OTC (over-the-counter) market and buying by central banks.
Global central banks continue to stock up on gold in a big way. Last year, central banks imported 1,037.4 tonnes of gold. This was the second highest on record, albeit down about 4 per cent from the 1,081.9 tonnes gold central banks bought in 2022.
Notably, global gold exchange traded funds (ETF) continued to see outflows for third consecutive year, suggesting tepid investment demand in global market. In 2023, ETFs saw outflows of 244 tonnes, significantly more than the outflows of 109.5 tonnes in 2022.
"Unwavering demand from central banks has been supportive of gold demands again and helped offset weakness in other areas of the market, keeping 2023 demand well above the ten-year moving average," said Louise Street, senior markets analyst at WGC.
Gold has for long been considered as a safe-haven asset, with people turning to the yellow metal in uncertain times. Geopolitical uncertainties, ongoing conflicts, and over 60 elections around the world, should support the interest in gold this year, feels Street.
In India, gold demand has been subdued in the 700-800 tonnes a year range since 2019 in the wake of rising prices, increase in duties and the stock market outperformance making equities more attractive.
In this backdrop, and as consumers accept the higher price, there is a potential for a spurt in demand in gold the near-term. However, any sharp price rise and volatility triggered by global factors could yet dent demand, said Somasundaram.