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After a dip in demand in 2018, it appears Indians are buying gold again.
Anecdotal data seemed to indicate strong demand for the yellow metal in India during the Akshaya Tritiya holiday. Retailers reported sales were up by as much as 25%. As it turns out, demand was indeed strong. Gold imports into India were up 36% year-over-year in May, according to sources cited by Bloomberg.
India imported 105.8 tons of gold in May. That compares with just 77.6 tons a year earlier. Combined shipments of gold into the country during April and May came in at 226.6 tons. That was up about 74% from the same period in 2018.
According to Yahoo Finance, “Higher gold imports by India - the world’s second-biggest consumer of the yellow metal - could support global prices further.”
Gold imports into India dipped by about a fifth in 2018, primarily due to a weak rupee and high domestic gold prices.
As Bloomberg reports,
“Sales were amazing last month, with huge demand seen during Akshaya Tritiya. The drop in prices has really complemented that trend,” said G.V. Sreedhar, managing director of Sree Rama Jewels and a former chairman of the All India Gem & Jewellery Domestic Council. Purchases for weddings were also good when compared to last year and sales are expected to be robust this month as well, he said.
Analysts say dynamics are in place to support continued strong demand through the end of the year. Gold-buying usually picks up in India in the last half of the year with wedding season and harvest time. Forecasters expect a normal monsoon season this year. A good monsoon season is good news for Indian farmers, as well as for the broader Indian economy. And when rural Indians have money in their pockets, they buy gold.
India ranks as second in the world in gold consumption behind China. According to Yahoo Finance, combined demand for gold from India and China has soared 71% in the last decade. A rising middle class and broad economic growth in both countries have spurred investment in the yellow metal.
Indians traditionally buy and hold gold. The yellow metal is interwoven into the country’s marriage ceremonies and cultural rites. Indians also value gold as a store of wealth, especially in poor rural regions. Two-thirds of India’s gold demand comes from these areas, where the vast majority of people live outside the official tax system.