India’s gold imports accelerated to the highest level in a decade in 2021 as jewelry sales almost doubled, says the World Gold Council. Demands are back on high despite the ongoing COVID-19 pandemic. The Council’s data shows that as wedding celebrations and festivities picked up in the three months through December, gold imports more than doubled to about 925 tons. This is the highest since 2011.
PR Somasundaram, regional CEO for India at the World Gold Council, said demand, starting 2022, is setting up a new normal toward 800 to 850 tons, compared with an average of 667 tons in the five years through 2020. “The next five years will be key as policy reforms and technology let gold evolve into a more transparent mainstream asset class,” he said. “Total demand fr jewelry, coins and bars jumped 79% to 797 tons last year. COVID-19 and its variants, global concerns on inflation, interest rates and geo-political developments will remain factors to watch in 2022.”
The World Gold Council’s latest Gold Demand Trends Report says that demand for gold reached 1,147t in Q4 of 2021, its highest quarterly level since Q2 2019, and an increase of almost 50% year-on-year. Gold bar and coin demand rose 31% to an eight year high of 1,180t as retail investors sought a safe haven against the backdrop of rising inflation and ongoing economic uncertainty.
The jewellery sector, as per the report, annual consumer demand rebounded to match 2019’s pre-pandemic total of 2,124t. This was aided by a strong Q4 when demand reached its highest level since Q2 2013 when the price of gold was 25% lower than the average comparative price in 2021. The report highlighted that central banks, for the 12th consecutive year, were the net purchasers of gold. They added 463t to their holdings, 82% higher than 2020. The Council said a diverse group of central banks added to their gold reserves, lifting the global total to a near 30-year high.
In regards to 2022, the report says gold is expected to face similar dynamics to those seen in 2021; there will be competing forces supporting and curtailing its performance. The Council believes gold price will react to real rates, which will respond to the speed at which global central banks tighten monetary policy and their effectiveness in controlling inflation. The market dynamics have historically created headwinds for gold but the elevated inflation will likely sustain demand for the precious yellow metal as a hedge.