The global central banks plan to increase gold holding in their reserves even as retail consumers may shun the yellow metal due to high prices.
As per the World Gold Council recent “Central Banks Gold Reserves” survey, nearly 30 per cent of world’s central banks plan to add gold to their own reserves this year. WGC has collected data from a record 70 central banks across the world.
In 2023, central banks added 1,037 tonne of gold – the second highest annual purchase in history following a record high of 1,082 tonne in 2022. Central banks added 290 tonne of gold in the March quarter of this year with India buying 19 tonnes. In April, their purchase was at about 33 tons.
The future of the international monetary system continues to be in flux, with central banks expressing less confidence in the US dollar’s sustained supremacy. In the face of these trends and an ever-changing investment environment, central bank gold demand is likely to remain robust, said the WGC survey.
Suvankar Sen, MD & CEO, Senco Gold and Diamonds said the gold purchasing spree of the central banks across the globe is set to push prices. “We expect retail demand to be affected in volume and in value terms it may be marginal rise if prices continue to rise very fast,” he added.
Ajay Kedia, Director, Kedia Commodities said investment demand in gold has increased in last few months as investors look to diversify on concern of high equity market valuation. With the expectations of a normal south-west monsoon, he added the rural demand for physical gold should rebound.
Rating agency ICRA expects the domestic jewellery consumption growth (in value terms) to moderate to about 8 per cent in FY’25 against an increase of 18 per cent in FY’24.
This is amid the sharp rise in gold prices in recent months and the consequent impact on consumer sentiments of postponing non-essential purchases. Gold prices at ₹71,597 per 10 grams are currently higher by 19 per cent over FY’24 average.
Consumers are expected to remain watchful of the price movements and adjust to the new price levels over two or three quarters. Given the elevated gold prices, ICRA expects the share of recycled gold in the overall supply to continue to increase and rise by 6 per cent in FY’25.
Sujoy Saha, Vice President, ICRA said the revenue growth of top 15 jewellers, which accounts for 75 per cent of the organised market, is likely to moderate to mid-to-high single digit in this fiscal against 16 per cent registered in FY’24, due to subdued consumer sentiments and high gold prices.
Wedding and festive demand is likely to be relatively muted amid a relatively lower number of auspicious days in FY25, he said.