India's Gold Market Sees Cautious Start to Festive Season Amid Price Volatility
India's gold market saw a cautious start to the festive season in late August, according to a recent update from the World Gold Council. Despite a strong price rally in August, followed by a pullback in September, domestic gold prices continue to trade below import parity. The discounts widened from an average of $34/oz in July to $51/oz in August and further to $78/oz as of 11 September.
The World Gold Council attributes the widening discount to local supply remaining adequate relative to demand. Market feedback suggests that the exchange of old gold for new jewellery has boosted local supply, keeping domestic prices below landed cost. The availability of unofficial supply is also cited as a contributing factor behind the widening discount.
Gold ETF demand remained positive in August, with inflows into Indian gold ETFs rising 67% month-over-month to $272mn. Digital gold buying also maintained momentum, averaging around $262mn per month from June to August. However, industry feedback suggests that the strength in gold jewellery demand seen in the run-up to the festive season has softened over recent weeks.