India’s record gold price
Gold prices in India have been on a roll for months now. They reached a record in Rupee terms last week, up around 15% in the last year and rising by almost 100% in the past four years.
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The decline in the Rupee’s value – it lost more than 11% against the US Dollar in 2022, its poorest performance since 2013 – is one reason why gold is proving so attractive. Further Rupee weakness against the Dollar is anticipated by many analysts, including the Indian ratings’ agency Crisil Ratings. Continued depreciation of the Rupee play against the high price; Indians dislike buying gold when prices are volatile, but the depreciating Rupee is a powerful incentive to buy, as consumers seek to protect their wealth.
India is shortly to become the world’s most populous country, overtaking China; gold demand, which traditionally is strong in India, is likely to expand proportionately. Earlier this year, the WGC said it expects India’s gold demand this year to be around 800 tonnes, against 774 tonnes in 2022.
The annual Hindu and Jain spring festival of Akshaya Tritiya falls on 22 April this year; like other festivals celebrated in India, this one is associated with buying and giving gold. However, the record price is deterring buyers for the time being; according to P.R. Somasundaram, regional chief executive officer for India at the World Gold Council (WGC) people want to be sure that the record price is not a blip and that prices will continue to rise: “If prices steady around current levels, demand may return for the key buying day of Akshaya Tritiya” he said.
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A further deterrent to buying is the currently high level of import tax on gold; taxes on gold are frequently altered by government. Currently the gold tax ranges from 12.5% on jewellery, bars and coins to 36.05% on those same items that weigh more than one kilo.
Global gold demand in 2022 rose by 18% year-on-year to 4,741 tonnes, the biggest annual figure since 2011, fuelled by “colossal central bank purchases, aided by vigorous retail investor buying” says the WGC. Central banks last year bought 1,136 tonnes, the most in more than five decades which, said the WGC, was due to a combination of high inflation in many parts of the world and geopolitical tensions. This vigorous central bank gold buying has continued so far in 2023; January saw central banks add another net 77 tonnes, which was 192% higher than December. China’s net gold imports via Hong Kong in February rose by almost three times compared to January, according to Hong Kong’s Census and Statistics Department.
The all-time high gold price in Dollar terms was $2,075 in August 2020. In late March, Fitch Solutions predicted that price would be revisited “in the coming weeks”.
At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.
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