Gold demand in India is increasing strongly, supporting gold prices to skyrocket in the coming time.

Fluctuations between gold demand and price

As one of the world's largest gold consumers, India is seeing a significant increase in gold imports, despite the precious metal's record high of over $2,450 an ounce. ANZ reports that in the first five months of this year, gold imports into India increased by 26% year-on-year to 230 tonnes.

According to a report from ANZ, the movement between gold demand and price has been remarkable. Although gold prices are at record highs, demand remains strong.

Experts note that while previous price increases were often accompanied by a decline in demand, this “sensitivity” has been decreasing over the past year. This indicates that gold demand is resilient to price fluctuations in India. Therefore, the forecast suggests that India could continue to be one of the key drivers of gold price stability in the near term.

World gold price developments. Data updated by Kitco. Chart: Hai Danh — World gold price developments. Data updated by Kitco. Unit: USD/ounce. Chart: Hai Danh

Factors Favoring Gold Demand in India

Gold demand in India is expected to remain strong this year, driven by favorable economic and weather factors.

Despite high gold prices, rising capital gains and income growth have helped boost demand for gold. Rising personal incomes and economic expansion are putting India on a path of sustained growth, with per capita income expected to rise by more than 60% to $4,000 by 2030, according to experts from ANZ.

Additionally, the forecast of a strong monsoon from June to September will also create favorable conditions for Indians to have a better harvest, thereby helping them increase their income to buy more gold.

Expectations that the government will reduce import duties on gold are also expected to help reduce costs and boost consumer demand. “If this happens, gold imports will see a significant jump,” ANZ analysts said.

In addition, the Reserve Bank of India has also started diversifying its foreign exchange reserves by buying more gold. With 37 tonnes of gold purchased in the first half of this year, the bank has become the world's second-largest buyer of gold this year, replacing the People's Bank of China.

Supported by solid demand in India and anticipated policy changes to reduce gold import duties, ANZ forecasts that gold prices could reach $2,500 per ounce by the end of the year, potentially highlighting India’s role as a rival to China in the global gold market.