Expectations for Economic Recovery in India... Gold Demand Also Expected to Rise Significantly

[Image source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] The World Gold Council (WGC) has forecast that India's gold consumption will surge by more than 50% compared to last year. Although India's gold demand fell to its lowest level in over 20 years last year due to the impact of COVID-19, it is expected to recover rapidly this year as the Indian economy rebounds.

Last year, India's gold demand dropped significantly by more than 30% compared to 2019 (690t), reaching only 446.4t. This was the lowest since 1994 (415t). Lockdown orders due to COVID-19 reduced social activities, causing a sharp decline in gold demand. Additionally, high gold prices amid reduced incomes due to the pandemic also contributed to the decreased demand.

P R Somasundaram, Director at WGC, predicted that India's gold demand this year will approach 6.9 million troy ounces, similar to the 690t in 2019.

He anticipated that the pattern of a sharp decline followed by a rapid increase in gold demand, as seen during the 2009 financial crisis, could repeat. India's gold demand fell sharply from 823t in 2008 to 642t in 2009 due to the global financial crisis, but surged to 1002t in 2010.

Somasundaram expects that since people were unable to engage in external activities last year, Indians will be eager to celebrate even small occasions this year. India is the world's second-largest gold consumer.

Gold-related companies are closely watching how much the Indian government will reduce the current 12.5% import tariff. The government is set to announce tariffs on the 31st. India relies almost entirely on imports to meet its large gold demand. High import tariffs inevitably burden jewelry businesses.

Somasundaram stated that it is necessary to lower tariffs to a reasonable level to curb smuggling. He added that gold smuggling could exceed 100t this year.

Somasundaram said, "If a scenario similar to 2009 repeats, high import tariffs could be a factor driving smuggling."

This content was produced with the assistance of AI translation services.