Lower gold prices fuel demand, raise festive season expectations: WGC

Gold demand conditions are improving in the country as consumers responded to lower and more stable prices, which has raised expectations of a stronger festive season, according to the World Gold Council.
Demand conditions are improving, raising expectations of a stronger festive season, stated the World Gold Council’s latest India Gold Market Update. However, elevated gold prices might continue to influence jewellery purchases, it added.

According to WGC, jewellery demand has reportedly strengthened, as consumers viewed recent price action as a buying opportunity. Consumers responded to lower and more stable prices, which corrected in June after a period of stability in July and recovered in August, leading retailers and manufacturers to replenish inventories ahead of the festive season.

Industry feedback revealed that deferred purchases have returned to the market, resulting in higher footfall and a recovery in demand beyond essential wedding-related purchases.
Manufacturers have reportedly begun receiving higher order flows, and inventory replenishment by jewellers has picked up ahead of the festive season, suggesting growing confidence in seasonal demand.
Old gold exchange remains elevated and continues to play an important role in facilitating purchases.

Physical investment demand, while moderating from earlier highs, remained supportive during the period of price correction. Lower prices continued to attract investors seeking strategic exposure to gold, while the recent rebound appears to have revived interest.

Meanwhile, gold imports rebounded in July after two consecutive months of weakness, indicating an improvement in demand and inventory replenishment by manufacturers and retailers ahead of the festive season.
Import value rose to $4.16 billion, more than double June’s $1.97 billion, while import volumes are estimated to have increased to 40-45 tonnes, up from 20 tonnes in June.

While recycled gold - primarily from the exchange of old gold jewellery for new - continues to supplement supply, the recovery in imports points to stronger physical demand compared with recent months.
Despite the increase, gold’s share of total merchandise imports remained relatively modest at 5 per cent, compared with the average 11 per cent during January-March, added WGC. PTI