Gold consumption is highest among India’s middle income group
Gold consumption in Indian households is highest among the middle income group – those with an annual income between Rs 2 lakh and Rs 10 lakh – consuming an average of 56% of the total volume of yellow metal sold in the country over the past five years, said the National Household Gold Consumption Survey conducted by the India Gold Policy Center (IGPC) of the Indian Institute of Management, Ahmedabad (IIM-A).
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“Per capita consumption is highest among the wealthy, but the total volume still belongs to the middle-income group. With increasing income there is an increasing propensity to consume gold, although the share of gold in the portfolio does not increase with the same proportion of income. Interest in digital gold products (paper gold) is increasing among the upper income class. The share of urban households in total consumption in value is close to 70%, a sign of an increase in demand with urbanization,” suggest the results of the survey. SEE TABLE BELOW
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Gold, according to the results of the IGPC survey, was a “must hold” among Indians, with more than 75% of households agreeing to own the yellow metal in some form or another. Weddings were the main reason for buying gold, with 43% of Indian households surveyed buying the yellow metal for this purpose, followed by 31% who bought it “for no specific purpose”.
Consumption, the IGPC said, has not been affected by demonetization or the implementation of the Goods and Services Tax (GST). Over the past five years, at least 74% of households have confirmed they have purchased gold, with 90% of them preferring to make payment in cash when buying the yellow metal, the IGPC said.
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“A new virus has exposed the fragility of global political and financial systems. The devastation wrought by the outbreak has led to a sharp increase in stock market volatility, which has triggered a ripple effect, reducing liquidity in the Gold has again emerged as a safe haven due to the diversification benefits it provides to equity portfolios,” said IGPC Chairman Professor Arvind Sahay.
This insatiable appetite for the yellow metal saw India’s gold imports surge by 33.34% to $46.14 billion in the financial year 2021-22 (FY22), according to the data. India is the second largest consumer of gold in the world after China. Imports were largely driven by the jewelry industry. Gemstone and jewelry exports in FY22 increased by about 50% to nearly $39 billion.
Gold consumption in India
Meanwhile, gold prices, according to the World Gold Council (WGC), rose for the second consecutive quarter during the January-March 2022 period, ending up 8% at $1,942 an ounce. – its best quarterly performance since the April-June 2020 period. Rapidly rising inflation, higher interest rates and unexpected geopolitical risk were the main drivers of gold prices over the past quarter, WGC said.
“A protracted conflict in Ukraine will likely lead to sustained investment demand. On the other hand, a quick resolution, which we all hope for, could see some tactical positions in gold unravel, but important strategic positions will remain. However, the opposing forces of inflation and rising rates are likely to be the strongest influences on gold in the April-June quarter of 2022. The post-COVID economic recovery and disruptions on the side of the supply, which have been exacerbated by the Russian-Ukrainian war, will likely keep inflation higher for longer,” WGC said.
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Against this backdrop, analysts expect gold prices to remain firm for most of 2022, albeit amid intermittent corrections. Those at HSBC Global Research, for example, raised their average gold price forecast for 2022 to $1,820 an ounce from $1,780 an ounce and to $1,750 an ounce from $1,715 an ounce. ounce for 2023. ============= ======