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Gold and silver demand in India sees strong recovery in H2 2021; next year will be even better - report

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(Kitco News) - Gold and silver demand in India recovered sharply in the second half of 2021 as jewelry purchases and investment in physical metal surged following a downturn caused by COVID-19 restrictions and uncertainty.

This was reported by Metals Focus, a leading independent precious metals consultancy, on the heels of a trip by its local team to more than ten cities in India to assess the situation on the ground, which revealed robust demand for gold and silver.

Looking first at gold, Metals Focus said that the strong recovery has been led by festive and wedding buying.

Importantly, apart from notable pent-up demand, as many weddings had been postponed in 2020 and H1 2021, the consultancy noted that lower gold prices have also supported higher consumer purchases.

According to the report, the pandemic has reinforced the Indian public’s faith in gold as the earlier price rally helped many to get through the crisis; gold offered a degree of safety, given it could easily be used as collateral to secure loans.

“This, combined with improving economic momentum and consumer confidence, has led to an increase in the average retail ticket size, by as much as 15-20% compared to pre-pandemic activity,” the authors of the report said.

Another interesting development noted by Metals Focus is how jewelers across the country are aggressively restocking after heavily scaling back on inventory last year.

“Many are now more confident about the prospects for jewelry demand and so are looking to increase stock levels; we estimate at least a 5-10% jump in retail stocks compared to last year,” the consultancy said.

Importantly, the strength in demand is not just limited to jewelry but also extended to physical investment products, especially in Diwali.

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Silver has also benefited from a noticeable improvement in market fundamentals over the last four months, Metals Focus continued.

The consultancy said that its recent meetings revealed that this reflects the economic momentum, easing lockdown restrictions and comparatively weaker silver prices. This, along with the six-month-long festive and wedding season, has helped silver demand recovery strongly, although it is still expected to fall short of pre-pandemic levels.

In recent years, silver jewelry demand has benefited because of increased buying from millennials and working women. Even so, while restrictions have eased, colleges and offices continue to operate from home, which has impacted buying from these consumers.

That said, other consumer segments continue to drive demand for both silver jewelry and silverware. The strength in the former is primarily driven by rural India, where good monsoons (bolstering expectations of a good harvest), higher government minimum support prices have all contributed to the economic recovery.

On the other hand, silverware demand is concentrated in urban India, which has benefited from the return of social events and weddings.

Turning to next year, Metals Focus expects that demand for gold and silver in India to continue improving, primarily driven by strong economic growth, relatively stable precious metals prices and pent-up demand.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.