A recent report by World Gold Council (WGC) revealed on Wednesday that gold demand in India saw a significant rise by 8 per cent, reaching 136.6 tonnes in the January - March quarter (Q1) in 2024. This rise was supported by a robust economic backdrop, despite gold prices reaching historic highs.

The increase in demand was further fueled by the Reserve Bank of India's (RBI) robust gold purchases. The central bank purchased over 19 tonnes of gold during the initial quarter of the current calendar year 2024 (Q1-CY24 / Q4-FY24), surpassing the 16 tonnes it purchased throughout the entirety of 2023, as outlined in the WGC report.

During the January-March period of this year, India witnessed a 20 percent surge in gold demand in value, totaling ₹75,470 crore on an annual basis. This growth can be attributed to both an increase in volume and an 11 percent rise in quarterly average prices.

The report further highlighted that India’s total gold demand, including both jewellery and investment, rose to 136.6 tonnes in January-March of the current year, up from 126.3 tonnes in the corresponding period of the previous year.

"Gold jewellery demand in India was 95t, 4% above the comparatively weak Q1’23. India’s continued strong macroeconomic environment was supportive for gold consumption. Rural demand is now seeing similar growth to that of urban India; in recent quarters it lagged behind as it struggled to shake off the effects of the pandemic," the report said.

It further added, “The early improvement in demand was evident in the local gold price, which moved to a premium in late January until late February, before reverting sharply to a sizable discount in March as the surging price choked off demand. The prospect of impending elections likely further contributed to the March slowdown, as gold consumption tends to decline during these periods."

In terms of gold bar and coins, India saw a 19 per cent year-on-year (YoY) surge in investment during the same period.

The strength in bar and coin investment echoed sentiment elsewhere in India’s gold market. ETFs saw positive Q1 inflows (+2t), and two new funds were launched during the quarter, indicating continued growth in these products.

“While investor sentiment towards gold remains positive, the domestic general election, which runs from April to June, may keep demand subdued. Data shows that gold consumption tends to decline ahead of such elections, particularly as there is greater scrutiny on the movement of gold and cash," the report added.

WGC further highlighted that any further sharp rise in the gold price could present a short-term headwind by sparking profit-taking and may result in a reduction in volumes purchased due to affordability constraints.