Shoppers buying gold jewelry and ornaments for the upcoming Hindu festival of Diwali at a jewelry shop in the city of Gangtok in Sikkim on November 11, 2012. Photo: AFP / Creative Touch Imaging Ltd / NurPhoto

The demand for gold in India has surged to pre-pandemic levels as the country recovers from two Covid-19 waves and is in the middle of the October-December festive season.

A drop in global prices and the release of pent-up demand are also fuelling this surge in the world’s second-biggest gold market.

According to the World Gold Council, gold demand in the July-September quarter jumped 47% year-on-year to 139.1 tonnes, compared with 94.6 tonnes in the year-ago period. In value terms, the demand rose 37% from last year at 593.3 billion rupees (US$7.9 billion) during the recently concluded quarter.

This is even higher than 123.9 tonnes recorded during the pre-pandemic September 2019 quarter.

Gold jewelry demand during the September quarter surged 58% to 96.2 tonnes from the same period last year. This was due to strong pent-up demand and occasion-related gift buying. In the case of gold bars and coins, sales increased 27% to 43 tonnes, from the same period last year. They are mainly purchased for investment purposes.

This is despite the fact that July-September is a seasonally weak period for gold demand due to monsoons.

Moving ahead, the World Gold Council expects the demand to pick up as economic activity comes back to normal across most Indian states, and Diwali and Dussehra festivals are considered auspicious to buy and gift gold ornaments.

“With the upcoming festive and wedding season, there is all the more enthusiasm towards gold demand, and we anticipate it to be the busiest gold-buying season, since the start of Covid,” said Somasundaram PR, Regional CEO, India, World Gold Council. However, he cautioned that there is a constant threat of new waves of Covid and lockdowns to control the spread of the virus.

India is the largest importer of gold and in volume terms, it imports 800-900 tonnes annually. It caters mainly to the demands of the jewelry industry.

Hence a rise in imports widens the country’s trade deficit. The imports in the September quarter jumped 187% from a year ago period to 255 tonnes.