Gold prices are unlikely to see a correction in the short term, thanks to the purchases made by central banks of different countries and the present geo-political uncertainties, Sachin Jain, Regional CEO, India, World Gold Council (WGC) has said.

He attributed one of the reasons for prices to surge to the 290 tonnes of gold bought by India, China, Turkey in the first quarter of the calendar year. “When a central bank buys gold, it is not based on demand and supply but for making their country stronger at whatever price. If a country decides that their reserves have to go up, they will buy at whatever price”, he told businessline.

RBI, in the first quarter, bought 19 tonnes of gold, and they continued to buy in April against 16 tonnes during the entire 2023. “If this trend continues, we believe that the outlook for gold remains strong”, he said.

Q1 demand up 7%

Moreover, the recent report of moving 100 tonnes of gold to India by RBI from London reflects how strong India is and wanting to have its assets close, he said

Asked whether the prices should go up from the current levels, Jain said “I think if something very stupid happens in the world, the prices of gold might go crazy”.

Jain, who was in Kochi as part of a reception organised by the All Kerala Gold and Silver Merchants Association, said traditionally, consumers tend to wait and watch whenever the prices of gold go up. It was only in February that the price was slightly stable, thereby wooing consumers.

From a jewellery consumption point, he said the sector witnessed about a 7 per cent rise in terms of volume and about almost 13 per cent increase in terms of value in the first quarter. India’s total gold demand in Q1 was 136.7 tonnes, up by 8 per cent against 126.3 tonnes in Q1 2023.

Demand forecast

As the price rallied to successive record highs, investors remained bullish, contributing to the robust demand. Investments into gold ETF’s too saw positive inflows of over 2 tonnes, he said.

“As we look forward, while the current high gold prices may temporarily put strain on demand, strong cultural and seasonal factors such as festivals, weddings helped by an expectation for a better monsoon and solid economic growth will support demand. Our full-year gold demand forecast for India is 700-800 tonnes, if price rally continues it could be lower end of this range”, Jain said

Kerala holds the distinction of being the highest gold-consuming State in India with an annual consumption of 200-225 tonnes. The per capita consumption of gold is probably the highest in Kerala, he said.