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According to a recent ICE 360 survey, 87% of households in India own some amount of gold. The households, with even the lowest of incomes, also own some amount of gold in India. Gold is considered to be a symbol of wealth and prosperity and rising gold prices is a reason to worry, especially in the festive season.

It is expected that gold prices will jump higher this festive season and it will be quite expensive to buy the yellow metal during this auspicious season. Jewellers usually see massive rise in demand for the yellow metal during Dhanteras. With rising prices, the market remains uncertain of the festive sale of gold this time round.

According to a Goodreturns.com report, gold rates in India depend largely on various international factors. For example, one classic reason for gold prices escalating recently is the supply constraint. Over the last few years, we have seen that gold production has seen some serious decline. The decline in gold production was more than 40% over the last few years.

According to the bullion traders, firming trend in the overseas market where gold traded at over three-month high as the dollar eased and equities slumped also gave a boost to the rising price of the metal. Besides, a pick-up in buying by local jewellers to meet seasonal demand at domestic markets and diversion of funds from falling equity markets also supported the uptrend.

The World Gold Council is, however, positive about demand for the metal in India in the second half of 2018. “In India, gold premiums are positive again, showing a tilt towards buying. While there were devastating floods, expectations remain positive for H2 as consumers prepare for their traditional buying period,” the WGC said.

Gold Demand Trends Q1 2018:

Soft start to 2018: Q1 demand down 7% Gold demand of 973.5 tonnes was the lowest in Q1 since 2008. The main cause was a fall in investment demand for gold bars and gold-backed exchanged traded funds (ETFs), partly due to range-bound gold prices. Jewellery demand was steady at 487.7 tonnes as growth in China and the US compensated for weaker Indian demand. Central banks bought 116.5t of gold (+42% y-o-y). Technology demand extended its recent upward trend; growing 4% y-o-y to reach 82.1 tonnes the total supply of gold increased by 3% to reach 1,063.5t and can be primarily due to a modest increase in producer hedging. Mine production was fractionally higher at 770t.

Gold Demand Trends Q2 2018:

Q2 gold demand 4% weaker on slower ETF inflows Gold demand stayed soft in Q2, dropping to 964.3t. The H1 total of 1,959.9t is the lowest since 2009. ETF inflows have steadied at low levels in recent quarters, making for weak y-o-y comparisons. In the Q2 jewellery demand dipped by 2% to reach 510.3t. The pace of central bank buying also slowed in Q2 (-7%). Bar and coin demand was virtually unchanged as growth in a few key markets cancelled out weakness elsewhere. Technology demand provided some relief, adding 2% to reach a three-year high. Gold supply notched up a second consecutive quarter of growth (up 3%) reaching 1,120.2t.