India guzzles gold: WGC report says consumption surged 79% in 2021

India’s gold consumption is expected to rise further in 2022 after jumping 79 per cent last year, as pent-up demand and an improvement in consumer confidence are seen boosting retail jewellery sales, the World Gold Council (WGC) said on Friday.

India’s gold consumption rose to 797.3 tonnes in 2021.

A rise in consumption by the world’s second-biggest gold consumer would help global prices, but could widen India’s trade deficit and put pressure on the ailing rupee.

According to the WGC Gold Demand Trends 2021 Report, India’s total demand for the yellow metal jumped to 797.3 tonnes in 2021. This was a massive 78.6 per cent surge from 446.4 tonnes in 2020.

“The year 2021 revalidated the strength of conventional wisdom about gold and holds several lessons in revival that will shape policy thinking for years to come,” WGC CEO of India Somasundaram PR told PTI.

Somasundaram further said: “India’s gold demand recovered by 79 per cent to 797.3 tonnes chiefly as a result of exceptional fourth quarter demand of 343 tonnes that surpassed even our most optimistic expectation articulated in the third quarter and turned out to be the best quarter in our recorded data series.”

Going forward, he said, this year COVID-19 and its future variants will remain a factor to watch as will price movements in gold, given global concerns on inflation, interest rate and geo-political developments.

“The spurt in demand that is, in part, a result of pent-up demand in the fourth quarter is less likely to be repeated this year, though the revival will continue to set a new normal above pre-pandemic levels. The next few years starting with 2022 will be years to watch for the effect of policy reforms, technology and industry collaboration to let gold evolve into a more transparent mainstream asset class,” he stated.

For the full year in 2022, Somasundaram said if the current scenario continues without any further major disruptions, then the total gold demand is likely to be around 800-850 tonnes.

The report further noted that jewellery demand during 2021 was up by 93 per cent at 610.9 tonnes, compared to 315.9 tonnes in 2020.

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Gold jewellery demand doubled year-on-year in 2021, surging past pre-pandemic levels to reach a six-year high following a record fourth quarter demand of 265 tonnes, fuelled by weddings and the festival season, underpinning the resilience of gold demand following its deep-rooted socio-economic footprint in household finance, Somasundaram said.

In value terms, jewellery demand skyrocketed by 96 per cent to Rs 261,140 crore, from Rs 133,260 crore in 2020.

He said that with the easing of COVID lockdown restrictions in the second half and successful progress of the vaccination programme, economic growth altered consumer sentiment significantly, triggering spending and investments across the board during festivals like Dussehra and Dhanteras.

“This marked a remarkable recovery with many retailers reporting record sales volumes above even those of pre-pandemic levels and imports and exports rising in tandem. With more weddings yet muted celebrations, higher savings and pent-up demand boosted the jewellery market,” he noted.

Many manufacturers reported stretched capacities and unusual waiting times, pointing to the robustness of recovery, he added.

Meanwhile, the total investment demand for 2021 was up by 43 per cent at 186.5 tonnes in comparison to 130.4 tonnes in 2020, while in value terms, demand was up by 45 per cent at Rs 79,720 crores against Rs 55,020 crores in 2020, the report said.

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However, total gold recycled in India in 2021 declined by 21 per cent to 75.2 tonnes, as compared to 95.5 tonnes in 2020, as per the WGC data.

Total gold imported in India increased by 165 per cent in 2021 to 924.6 tonnes, compared to 349.5 tonnes in 2020.

“This surge in imports can mainly be attributed to manufacturers and retailers stocking up after clearing up their existing stocks following the implementation of hallmarking norms,” Somasundaram said.

Gold investment demand in the fourth quarter also surged to an eight-year high of 79 tonnes, softer prices in November coupled with a positive outlook about future prices adding impetus to retail investments, he said.

He added that digital gold savings also rose impressively due to their ease and safety, a pointer to altering future buying behaviour in investment gold.

(With inputs from PTI)