India’s gold market is steeped in tradition and still highly fragmented. However, over the last few years the industry has become more organised and regulated.
Gold ended August lower m-o-m, down 2% to US$1,715.9/oz – its fifth consecutive monthly decline. The promising bounce that began in mid-July ran out of steam in mid-August after failing to break the US$1,800/oz resistance level.
Global gold ETFs registered outflows of 51t (US$2.9bn, 1.4%) in August, in line with price performance. This was the fourth consecutive month of outflows. Funds have now given back two-thirds of the inflows accumulated through April; y-t-d global inflows are 102t (US$7.5bn), with total holdings at 3,651t (US$202bn), up 3.6% on the year.
With the rapid growth in funding ratios over the past year, an increasing number of UK defined benefit (DB) pension schemes have been contemplating their investment approach for the endgame – the point at which a plan moves from being underfunded to being fully funded or even having a surplus.
As food and fuel prices in India have risen, inflation has surged: in June, the wholesale price index (WPI) and the consumer price index (CPI) remained elevated at 15.18% and 7.01% respectively. Meanwhile, the 10-year Indian government bond rose by 1% between the end of November 2021 and July 2022.
Gold fell 3.5% in July, leaving it down 2.9% on the year at US$1,753/oz. A strong US dollar and sticky real yields weighed on gold in the first half of July.
Global gold ETFs registered outflows of 81t (-US$4.5bn) in July. This was the third consecutive month of outflows and the worst since March 2021. A stronger US dollar and COMEX net long positioning – the lowest since April 2019 – helped push the gold price down through the US$1,800/oz support level.
Gold demand softened in Q2. Despite Q2 weakness, strong first quarter ETF inflows fuelled a notable H1 recovery Gold demand (excluding OTC) was 8% lower y-o-y at 948t. Combined with Q1 this took H1 demand to 2,189t, up 12% y-o-y.
While major Japanese and global assets have witnessed declines in H1, gold has delivered a 19% return in local currency amid a combination of rising inflation, geopolitical risks and a weaker yen.
Global gold ETFs registered 28t (US$1.7bn) of outflows in June. This was the second consecutive month of outflows, following the 53t (US$3.1bn) that left these funds in May. While the recent flows were enough to push Q2 into net outflows of 39t (US$2bn), year-to-date net inflows remained positive at 234t (US$14.8bn). Total holdings at the end of June stood at 3,792t (US$221.7bn), up 6% y-t-d.