Gold imports hit 10-year high as jewellery demand doubles

Celebrations picked up in full swing in the three months through December, more than doubling full-year imports to 925 tonnes

Gold imports in the country accelerated to the highest level in a decade last year as jewellery sales almost doubled, with the demand outlook remaining bright, according to the World Gold Council (WGC).

Demand revived after two bleak years as Indians once again flocked to jewellery stores in 2021 as fears of the pandemic eased. Weddings and celebrations picked up in full swing in the three months through December, more than doubling full-year imports to about 925 tonnes, the highest since 2011, according to the council data.

“Starting 2022, you will see demand setting up a new normal toward 800-850 tons,” compared with an average of 667 tonnes in the five years through 2020, said P.R. Somasundaram, regional chief executive officer for India at the London-based group. The next few years will be key as policy reforms and technology let gold evolve into a more transparent mainstream asset class, he said.

 Total demand for jewellery, coins and bars jumped 79 per cent to 797 tons last year, the data showed. Covid-19 and its variants, global concerns on inflation, interest rates and geo-political developments will remain factors to watch in 2022, he said.

The country's gold consumption surged to 797.3 tonnes in 2021, on the back of recovery in consumer sentiments and pent-up demand post Covid-19-related disruptions and the bullish trend is set to continue this year as well, according to the World Gold Council (WGC).

WGC in its Gold Demand Trends 2021 Report said India's total gold demand jumped to 797.3 tonnes in 2021, registering a massive 78.6 per cent jump from 446.4 tonnes during 2020.

"The year 2021 revalidated the strength of conventional wisdom about gold and holds several lessons in revival that will shape policy thinking for years to come,"  Somasundaram said.

Somasundaram further said "India's gold demand recovered by 79 per cent to 797.3 tonnes chiefly a result of an exceptional fourth quarter demand of 343 tonnes that surpassed even our most optimistic expectation articulated in the third quarter and turned out to be the best quarter in our recorded data series".

Going forward, he said, this year Covid-19 and its future variants will remain a factor to watch as will price movements in gold, given global concerns on inflation, interest rate and geo-political developments.

"The spurt in demand that is, in part, a result of pent-up demand in the fourth quarter is less likely to be repeated this year, though the revival will continue to set a new normal above pre-pandemic levels.

"The next few years starting with 2022 will be years to watch for the effect of policy reforms, technology and industry collaboration to let gold evolve into a more transparent mainstream asset class," he stated.

For the full year in 2022, Somasundaram said if the current scenario continues without any further major disruptions then the total gold demand is likely to be around 800-850 tonnes.

The report further noted that jewellery demand during 2021 was up by 93 per cent at 610.9 tonnes, compared to 315.9 tonnes in 2020.

Gold jewellery demand doubled year-on-year in 2021, surging past pre-pandemic levels to reach a six year high following a record fourth quarter demand of 265 tonnes, fuelled by weddings and festival season, underpin the resilience of gold demand following its deep-rooted socio-economic footprint in household finance, Somasundaram said.

In value terms, jewellery demand skyrocketed by 96 per cent to Rs 261,140 crores, from Rs 133,260 crores in 2020.

He said, with the easing of lockdown restrictions in the second half and a successful progress of the vaccination program, economic growth altered consumer sentiment significantly, triggering spending and investments across the board during festivals like Dussehra and Dhanteras.

"This marked a remarkable recovery with many retailers reporting record sales volumes above even those of pre-pandemic levels and imports and exports rising in tandem. With more weddings yet muted celebrations, higher savings and pent-up demand boosted the jewellery market," he noted.