Pent-up demand will continue to push gold purchases and imports in this new year, after driving the highest ever gold imports in the previous year 2021. India more than doubled gold imports in 2021 to $55.7 billion, Reuters reported citing an unidentified government official. This far surpassed gold imports worth $22 billion in the previous year 2020; and the earlier all-time high of $53.9 billion in 2011. The pent-up demand from 2020 due to Covid lockdown, postponed weddings and suppressed festival shopping led to a phenomenal increase in gold buying and thus gold imports.
Gold imports to rise in 2022, even if price rise
While there is a possibility that gold imports could moderate in January this year with the rising cases of Covid-19 which have prompted local authorities across many states to impose restrictions or curfews, it will only ‘grow in the later months’. “We expect 2022 to be robust and strong in terms of gold sales. We have seen that even if gold prices go up, the demand remains robust, at least in the consumer market. Gold is a favourite among consumers – for both the consumer market and as an investment,” Vipin Sharma, Chief Merchandising Officer, BlueStone, told Financial Express Online. “The country, this time, is better geared up and so, while there might be restrictions during the early part of the year, it will get better quite strongly,” he added.
Will the gold price rise in 2022? Yes, most likely
Gold prices are indeed expected to rise, due to the impact of the rising Omicron cases. “Gold prices are expected to remain high in the medium term and later may show correction with global cues and US Fed rate hike. Importers will try to get advantage from lower gold prices combined with stronger rupee,” Tapan Patel, Senior Analyst (Commodities), HDFC Securities, told Financial Express Online.
Why India will continue to love gold in 2022
Despite uncertainties, the gold demand outlook 2022 will remain healthy with considerable unmet demand still in the market, according to industry leaders. “Gold imports in 2022 will remain healthy. Reduced import duty has increased authorized transactions of gold which, in turn, will drive gold import,” Ahammed MP, Chairman, Malabar Gold & Diamonds, told Financial Express Online. Overall, in 2022, the purchase trend will mainly be driven by investment goals and the urge to fulfill pent-up demand, he said.
What led to India doubling gold imports in 2021
“Besides pent-up demand, the cheaper gold prices compared to 2020 is one of the key reasons for higher spot demand and imports. India reported a sluggish start of the year 2021 with underpinned spot demand. The second half of the year reported robust demand starting ‘Akshaya Tritiya’ followed by festival buying. Eased travel restrictions boosted wedding demand from NRI weddings and buying on ‘Pushya Nakshatra’ ahead of Diwali season,” Tapan Patel of HDFC Securities said. The total India consumer demand had risen by 47 per cent in the September quarter on a year-on-year basis, as per the World Gold Council report, he added.
In volume terms, India imported 1,050 tonnes of gold in 2021. This is the most in a decade, and far more than double of the 430 tonnes imported in 2020. “As the economy regained momentum in 2021, gold purchases received a boost due to the unleashing of pent-up demand. Wedding season led to volume-based demand whereas the safe-haven status of gold attracted investment-focussed buyers. In addition, as the jewellery retail trade is steadily becoming transparent and value-driven, more people are channelising their investment into gold and purchasing gold jewellery from organised jewellery retail players,” said Ahammed MP of Malabar Gold & Diamonds.
Gold prices subdued last year 2021
Also, price correction during early last year made gold more affordable for retail consumers. Local gold prices hit a record high of Rs 56,191 per 10 grams in August 2020, but fell back to Rs 43,320 in March 2021, when monthly imports spiked to a record 177 tonnes, the government official said in the Reuters report. In December, India imported 86 tonnes of gold, slightly more than last year’s 84 tonnes.
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