India's Gold Market Sees Recovery Ahead of Festive Season

India's gold market is showing signs of recovery after a sharp correction in June. Gold prices have risen by nearly 9% in the first two weeks of August to $4,391 per ounce, while domestic prices climbed around 7% to Rs 1,51,744 per 10 grams as of August 14.

The rebound is supported by changing expectations around monetary policy, a weaker US dollar, and renewed inflows into gold exchange-traded funds (ETFs). Physical demand has improved, with jewellery sales increasing and retailers restocking ahead of the festive season. India's gold imports also rebounded sharply in July, more than doubling to $4.16 billion from $1.97 billion in June.

The World Gold Council's latest India Gold Market Update notes that while investment demand has remained supportive, it has moderated from earlier this year. Indian gold ETFs attracted net inflows of Rs 1,560 crore in July, down 55% from the previous month, but still saw a 2% increase in assets under management to Rs 1,73,300 crore.

Ponmudi R, CEO of Enrich Money, notes that the recent rebound is supported by improving physical demand in India. The recovery in July gold imports points to stronger physical demand and inventory restocking ahead of the festive season. However, elevated gold prices may influence jewellery purchases, with consumers potentially compromising on quantity rather than completely postponing purchases.