Globally, the demand for gold was 797.3 tonnes in 2021; a jump of nearly 78 per cent from the 446.4 tonnes in 2020, finds a recent report by the World Gold Council (WGC). Gold demand in India kept pace with the global trend.
“Indian gold jewellery demand almost doubled y-o-y in 2021, surging past the pre-pandemic levels to reach a six-year high of 611 tonnes. Record quarterly demand of 265 tonnes in Q4 set the seal on this remarkable annual performance,” the report states.
Total gold imported in India in 2021 was 924.6 tonnes compared to 349.5 tonnes in 2020, an increase of 165 per cent.
The growing demand for gold is chiefly due to inflation and interest rate expectations in 2021. “Investments may struggle in 2022 amid competing forces but consumer demand should hold strong and central banks will likely keep buying,” states the report.
Although the annual average price of gold was $1,799/oz in 2021, 2 per cent higher than in 2020, it fell by 4 per cent in the last quarter of 2021.
With the lockdown restrictions easing June onwards after the second wave of Covid reduced and with the successful roll-out of the vaccination program, India’s economy gradually started recovering in 2021. This boosted consumer sentiment both in urban and rural India.
Other major reasons that led to the spike in the gold demand in the fourth quarter were festivals and weddings. From October onwards, festivals like Dussehra and Pushya Nakshatra pushed up gold sales volumes above pre-pandemic levels, finds the report.
Due to these factors, demand for gold in India for Q4 was at 343.9 tonnes, up 85 per cent from the Q4 demand in 2020, with the gold demand value at Rs 148,780 crore.
“(Year) 2021 revalidated the strength of conventional wisdom about gold and holds several lessons in a revival that will shape policy thinking for years to come. India’s gold demand recovered by 79 per cent to 797.3 tonnes in 2021, chiefly a result of an exceptional Q4 demand of 343 tonnes that surpassed even our most optimistic expectation articulated in Q3 and turned out to be the best quarter in our recorded data series,” says Somasundaram P.R., India Regional CEO, WGC.
The maximum investment was recorded in gold bars and coins. Globally, there was a spike of 31 per cent in bar and coin investment, recording an eight-year high.
“ETFs (exchange-traded funds) and OTC (over-the-counter) demand experienced weakness in 2021 while bar and coin climbed, with some regions posting decade-high levels of demand. Bar and coin demand, which our analysis suggests is more sensitive to changes in inflation than interest rates, ended the year 281 tonnes higher,” the report states. Investment in gold ETFs is likely to remain the same in 2022 as it was in 2021.
