The World Gold Council (WGC) stated on Tuesday that India’s gold consumption in the months of October to December may decrease by almost 25% from a year earlier due to inflation’s impact on rural demand. The world’s second-largest consumer of gold may have reduced purchases, which might have an impact on prices, which are now trading close to their lowest level in more than two years.
Reduced demand for imported gold may also aid in reducing India’s trade imbalance and supporting the currency. According to Somasundaram PR, regional chief executive officer of WGC’s Indian operations, higher inflation is likely to stifle rural demand, which was beginning to recover from the disruption caused by last year’s COVID-19-led lockdowns.
India’s annual inflation rate in September stayed above 7% and outside the tolerance range set by the central bank, increasing the likelihood that rates will be increased at the following policy meeting. In India, the demand for gold typically stems from rural communities where jewellery is a common way to store wealth.
According to Somasundaram, India’s gold demand could decrease to about 250 tonnes in the December quarter from 343.9 tonnes a year earlier. According to him, the decline could lower India’s overall gold consumption in 2022 to roughly 750 tonnes, down 6% from the 797.3 tonnes it consumed in 2017.
According to a study released on Tuesday by the WGC, India’s demand for gold increased 14% from a year ago to 191.7 tonnes in the three months that ended in September as a result of holiday-driven jewellery purchases. Because there are fewer international flights now than there were two years ago, gold smuggling has increased after New Delhi increased the import duty on the precious metal in July. With a total tax of 18.5%, there is much more of a tendency to smuggle, according to Somasundaram.
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