(Kitco News) – Even as imports, jewelry, and ETF demand declined in December, gold was still the best-performing major asset in India last year, and stable prices should boost jewelry demand during the current wedding season, according to Kavita Chacko, Research Head for India at the World Gold Council (WGC).
Chacko wrote in the latest WGC update that gold was the clear winner in 2024. “Despite a price moderation in November and December, gold emerged as the top-performing asset class in India, posting y/y gains of 21% in 2024,” she noted. “However, gold’s return in INR was lower than its 26% return in USD terms.”
Gold extended its decline in December, falling 2% after a 4% drop in November, and closing at $2,610 per ounce. But Chacko said this was largely a U.S. dollar phenomenon, and Indian gold prices were much more stable. “In the domestic market, amid price fluctuations, gold closed December 0.4% lower at INR76,328/10g,” she wrote.
“Gold has started 2025 on a strong note, rising 2.7% to US$2,679/oz as of 10 January, partly recouping the losses of the previous two months,” she said. “Global uncertainties continue to support prices. There has been a similar increase in INR terms too (to INR78,360/10g).”
Domestic jewelry demand has remained subdued since December, however. “Consumers have been hesitant about buying gold jewellery due to high and fluctuating prices and the inauspicious period in the Hindu calendar, which runs from mid-December to mid-January,” Chacko said. “Buying has primarily been wedding-related. But anecdotal market reports tell us that physical investment demand for bars and coins has been sustained, emphasising gold’s investment appeal.”
This subdued demand is also reflected in the spread between domestic and international gold prices. “Since December, domestic gold prices have traded at a discount to international prices; discounts averaged US$4/oz and have recently widened to US$15/oz,” she said.
On the investment front, Gold ETFs managed to maintain their positive flows through the end of the year, but momentum slowed in December.
“Indian gold ETFs experienced their eighth consecutive month of net inflows in December, although at their lowest level since June 2024,” Chacko noted. “According to the Association of Mutual Funds in India (AMFI), gold ETFs recorded net inflows of INR6.4bn (~US$75mn) in December, reflecting a nearly 50% decline from the previous month and 32% lower than the average monthly inflows of INR9.4bn (~US$112mn) for the year.”
“Investor demand for gold ETFs surged in 2024, attracting net inflows of INR112bn (US$1.3bn), the strongest annual inflow on record and nearly four times higher than the previous year,” she added. “Assets under management (AUM) grew by 63% y/y, reaching INR446bn (~US$5.2 bn). In total, 15t were added to gold holdings during the year, bringing the collective holdings to 57.8t and marking a 35% y/y increase. Furthermore, three new gold ETFs were launched in India during the year, bringing the total number of physically-backed funds available in the local market to 18.”
Chacko said that the combination of strong gold price momentum, global instability, favorable tax revisions in the July budget, domestic equity market volatility, and “the inherent transparency, liquidity and ease of transactions” have supported investor interest in ETFs.
“A spike in inflows into multi-asset funds, which invest in gold ETFs, has been a contributing factor,” she wrote. “These funds saw their net inflows nearly double to INR425bn (~US$5.1bn), with the market value of their gold ETF investment increasing by 97% y/y.”
India’s central bank also took a step back in December amid the record-high prices, but 2024 was still a standout year for sovereign buying.
“After 11 months of purchases the RBI paused its gold buying in December, accumulating 72.6t in 2024 and bringing its reserves to 876t,” Chacko said. “Nearly one-third of its gold purchases occurred in October and November (23t). The 2024 acquisition marks a significant increase on the 16.2t bought in 2023 and ranks as the third highest annual purchase since 2001.”
Chacko noted that the RBI ranked second in gold purchases among all central banks in the first 11 months of the year.
“Gold now makes up 10.6% of the RBI forex reserves, a noteworthy rise from 7.7% a year ago,” she said. “This increased share highlights the RBI’s efforts to diversify its forex reserves into various assets, particularly gold, which is seen as a hedge against external uncertainties and challenges. 2024 marks the seventh consecutive year that the RBI has been a net buyer of gold.”
Turning to the import picture, Chacko said that while gold imports were revised lower, the annual numbers remained steady.
“There has been a significant downward revision in the gold import data published by the Ministry of Commerce for the period from April to November 2024; the revision has been attributed to double counting during the migration of data between two platforms,” she said. “According to Ministry of Commerce data, from April to October the total quantity of gold imported has been revised down by 82t. These revisions ranged from 2t to 28t per month, with adjustments becoming more pronounced from August 2024. In value terms, the imports from April to November saw a total correction of US$12bn.”
“The sharpest revision – of US$5bn – occurred in November, although imports remained sizeable that month at 117t,” she added. “Imports in December amounted to US$4.7bn, which in volume terms we estimate to be in the range of 55-60t.”
“Overall, the volume of gold imported in 2024 was slightly lower than the previous year, although the value of these imports increased by 21% to US$52bn, reflecting the gold price,” she said. “Based on the latest available data we estimate the total import volumes for the year to be approximately 724t compared with 744t in 2023.”
Looking ahead, Chacko said the World Gold Council expects jewelry demand to post a gradual recovery from mid-January onward on the back of seasonal wedding purchases. “Demand, however, will be favourably influenced by gold price stability,” she said. “The recent trend in investment demand is expected to continue.”
