India’s gold consumption is expected to rise further in 2022 which could widen the trade deficit and put pressure on the ailing rupee, the World Gold Council said on Friday. Somasundaram PR, regional chief executive officer of WGC’s Indian operations, said that the gold consumption is likely to hit a six-year-high with 800-850 tonnes this year as against 797.3 tonnes in 2021, reported Reuters.
India’s gold consumption already saw a 79% jump last year owing to the pent-up demand due to the coronavirus disease (Covid-19) pandemic and an apparent improvement in consumer confidence boosting retail jewellery sales, according to the WGC’s regional head. The disastrous second Covid wave and restrictions imposed by authorities prompted many to postpone wedding celebrations to late 2021 and even 2022.
“Muted wedding celebrations due to restrictions mean more savings and that money is flowing into gold,” Reuters quoted Somasundaram as saying.
A popular gift from family and guests at weddings, gold consumption nearly doubled in the December quarter from a year ago to a record 343.9 tonnes, according to a WGC report published on Friday. With local gold prices trading around ₹48,000 per 10 grams this week, Somasundaram said that there is greater acceptance at the current price level from Indian consumers. Gold prices hit a record high in August 2020 when it was trading at ₹56,191 rupees per 10 grams.
“We expect Indian investment demand to remain healthy as we head into 2022. It may receive support from higher inflation expectations and possible weakness in the rupee due to the widening trade deficit,” the WGC said in the report.
A December WGC report on bullion trade in India highlighted that imports made up 86% of India’s gold supply between 2016-2020 and continue to grow despite high import duty. Another report on Gold Outlook 2022 suggested that gold’s performance can receive positive support from key jewellery markets, such as India.
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