India's gold market is experiencing a notable surge in demand, bolstered by the government's decision to cut import taxes on gold, combined with the seasonal rush of the upcoming festive and wedding season. As the world’s second-largest consumer of gold, India typically sees a significant uptick in purchases during key cultural events like Diwali and the wedding season, where gifting and wearing gold hold auspicious value. This year, the surge in demand is amplified by a sharp reduction in the customs duty, dropping from 15% to 6%, a move that has directly impacted the cost of gold in the domestic market.

According to data from the World Gold Council, gold imports tripled in August 2024, soaring to 140 tons compared to the previous month. This dramatic increase comes in the wake of the import tax cut, and experts suggest that the trend will continue through the remainder of the year as India enters its peak gold-buying season.

Impact of Tax Cuts on the Indian Gold Market

The reduction in customs duty on gold imports is a crucial policy shift, coming at a time when global economic uncertainties, particularly in China, have dampened demand in other markets. However, in India, the tax cut has reinvigorated consumer interest, particularly among price-sensitive buyers. With domestic gold prices falling, many consumers are now opting for heavier jewellery pieces, reversing a trend that had favored lighter, more affordable designs.

Mr. Sachin Jain, regional CEO for India at the World Gold Council, highlighted the importance of these changes, stating that they could contribute an additional 50 tons of gold demand in the second half of 2024 compared to last year. Total demand for gold in India for 2024 is now expected to fall between 750 and 850 tons, marking a significant increase in annual consumption.

India’s bountiful monsoon season has further fueled this surge, boosting the disposable incomes of farmers, who represent a key demographic for gold purchases. With better crop prospects and more income, rural buyers are expected to contribute significantly to this year’s gold demand, especially during the festive season.

Key Gold Buying Periods: Festivals and Weddings

Traditionally, the months leading up to Diwali in November are the busiest times for gold buying in India, with the season continuing through December and January, key months for Indian weddings. Gold plays an integral role in Indian weddings, with families often purchasing large quantities of gold jewellery as part of the celebrations. This tradition continues to anchor India’s position as a global leader in physical gold consumption, even as other major markets, like China, see a decline in jewellery demand due to economic slowdowns.

In addition to jewellery demand, gold-backed ETFs have also seen a resurgence in India. According to industry experts, Indian gold-backed ETFs have experienced positive inflows for four consecutive months, reflecting a growing interest in physical gold as a portfolio diversifier. Mr. Gnanasekar Thiagarajan, Director at Commtrendz Risk Management Services, emphasized that gold-backed ETFs are increasingly being viewed as a hedge against equity market volatility, particularly in times of economic uncertainty.

India's Global Standing in Gold Consumption

India’s resurgent demand for gold in 2024 comes after a modest 4.8% year-on-year (YoY) increase in inbound shipments, which totaled 305 tons in the first half of the year. The recent surge in imports reinforces India's position as a bright spot in the global physical gold market, with demand levels significantly outpacing those in other major economies.

This growth is further supported by a combination of favorable policies, seasonal buying patterns, and economic factors such as improved rural incomes. Experts predict that India’s gold imports will continue to rise, particularly as the wedding season and festive period provide a sustained demand for both jewellery and investment-grade gold.

As India remains a key player in the global gold market, its robust demand underscores the enduring cultural and economic significance of gold in the country. For more updates on India’s financial and market trends, explore the Best IPO to Apply Now - IPO List 2024, Latest IPO, Upcoming IPO, Recent IPO News, Live IPO GMP Today - Finance Saathi and check out the Top News Headlines - Share Market News, Latest IPO News, Business News, Economy News - Finance Saathi for the latest insights.

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India’s gold market is set to remain vibrant in the coming months, driven by favorable policy shifts, cultural traditions, and evolving consumer behaviors that continue to shape its role in the global gold economy.