MUMBAI: With the clouds of war looming over the central European landscape and asset price volatility rocking financial markets, demand for gold among investors is picking up even as the metal price topped a 13-month high on Tuesday.
“Investment demand for gold is estimated to have risen by 15 per cent so far this month from a year ago,” said Surendra Mehta, national secretary, India Bullion and Jewellers Association (IBJA), whose rates are used to price sovereign gold bonds issued by the government.
Rising investment demand for bars and coins and sovereign gold bonds was witnessed in the fourth quarter last year and in January 2022 amid anticipation of the US rate-setting committee turning hawkish to rein in consumer price rise, which in January hit a four-decade high of 7.5 per cent.
India is a price taker for gold which is denominated in USD, as are other commodities such as crude. In anticipation of global liquidity tightening, investor appetite rose for gold bar and coins and SGB, while gold ETFs witnessed an outflow of Rs 452 crore in January. Bar and coin demand in India in the December quarter last year was up 61 per cent year over year at 78.9 tonnes, according to World Gold Council.
Demand for SGBs in January this year grew 92 per cent y-o-y to 2.3 tonnes. On Tuesday, escalating Russia-Ukraine tensions boosted gold price to a 13-month high of `50,547 per 10 gm. “Gold is likely to continue its journey of safe-haven interest as geopolitical risks persist,” Shekhar Bhandari, global transaction banking, Kotak Mahindra Bank, told TNIE.