India’s economic growth has been stronger than expected, driven by higher public investment and domestic demand. GDP growth for FY24 has been forecast by the National Statistics Office at a healthy 7.3%. This growth momentum is expected to continue in the coming financial year too (RBI projection of 7% growth in FY25)Ahmedabad Wealth Management. Consumption has been led by urban demand which is supported by growing income levels and affluence. The agriculture sector despite being faced with unfavourable weather has seen higher activity and is expected to support rural demand. High frequency economic indicators have been seeing a consistent expansion/growth.3

With the general election due in April-May, the government announced an interim budget for FY25 in which tax policies were left unchanged, capital expenditure was raised by 11% and the fiscal deficit was reduced to 5.1% of GDP from 5.8% in the ongoing fiscal year. The gross market borrowings are reduced to Rs14.13 lakh crore (US$ 170.4 bn) from Rs15.43 lakh crore in FY24. The proposed lower market borrowings have led to a sharp drop in yields on government securities. The lower yields and resultant lower cost of credit in the system bodes well for economic growth and consumption.

Still high prices have been impacting jewellery demandSimla Stock. Anecdotal evidence suggests gold consumer demand has been weak and jewellers are currently trying to reduce stock.

Indian gold jewellery demand is likely to be subdued in the absence of a significant drop in price levels: retailers are not optimistic for any meaningful return in demand over the next couple of months in the absence of a price correction. Moreover, wedding jewellery demand is likely to be tempered given the fewer number of auspicious wedding days in Q1 (16 versus 28 in Q1 2023). A gradual return in retail jewellery demand is expected in early May around the time of Akshaya Tritiya, which is a traditionally considered to be an auspicious period to buy gold. Jewellers too are expected to start accumulating stock ahead of this period.

At the same time, investment demand for gold is likely to get a boost, supported by the favourable domestic economic growth prospects and the trend of growing domestic investment inflows amidst the prevailing global geopolitical and economic uncertainty.

After nearly three months, domestic prices have moved from a discount to premium relative to international prices since the fourth week of JanuaryKolkata Stocks. The premium compiled by NCDEX has ranged from US$0.25/oz to US$4/oz since then.4 This could in large part be attributed to the changes in supply-demand dynamics brought about by the increase in customs duty on gold findings and many domestic bullion refiners curtailing/stopping gold doré imports from the least developed countries (LDCs) at zero customs duty.5