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This report covers key stages in the hallmarking journey in order to ascertain what works best in other jurisdictions and how India can maximise the benefits of mandatory hallmarking. 

The third quarter saw a 9% year-on-year (y-o-y) drop in gold demand to 915 tonnes (t). Year-to-date (y-t-d) demand was down by 12%.  ETFs had another quarter of positive inflows, but at 18.9t, they fell far short of the 144.3t influx in Q3 2016. 

With an annual demand of approximately 800-900 tonnes, the size of the Indian gold market is second only to that of China. Despite its significant size and important global position, the Indian gold market is unable to realise its potential due to multiple challenges.

Welcome to the autumn edition of Gold Investor, where leading commentators and market participants discuss new developments for gold and its evolving global role.

Q2 gold demand of 953.4t was 10% lower than 2016, while H1 demand slowed 14% to 2,003.8t. 

The gold market is broad and complex, so producing statistics on demand and supply is challenging. But having such statistics is crucial to understanding the fundamentals of the market. 

A barrage of policy initiatives aimed at purging India of black money and instilling greater transparency rocked India’s economy last year, including its gold market. The most dramatic was the radical decision to demonetise over 15 trillion rupees, around US$220bn. 

2016 full-year gold demand gained 2% to reach a 3-year high of 4,308.7t. Annual inflows into ETFs reached 531.9t, the second highest on record. Declines in jewellery and central bank purchases offset this growth.

In 2015 India was the world’s fast growing economy; in recent years millions have been lifted out of poverty and India’s middle class has swelled. This is important because our econometric analysis indicates income growth drives gold demand. 

China has gone through remarkable change in the past 30 years. Within one generation, the shape of our economy has altered beyond all recognition: agriculture’s share of output has fallen and the service sector has become an important driver of growth.