India’s Gold Market in May: Retail Demand Improved and Imports Jumped


  • The domestic gold price ended 1.9% lower in May at Rs50,861/10g, and further 0.3% lower so far in June1
  • Retail demand remained strong during the first three weeks of the May due to wedding- and festival-related purchases before slowing towards the end of the month2
  • The local market surged to a premium of US$4-5/oz by the third week of May but flipped back to a discount of US$3-4/oz by the end of the month as retail demand softened  
  • Official imports remained strong at 98t in May, significantly higher than official imports in April this year (27.1t) and May 2021 (11.4t)
  • Indian gold ETFs witnessed a modest net inflow of 0.4t in May, primarily driven by higher inflation and a depreciating rupee; total holdings increased to 38.9t
  • The Reserve Bank of India (RBI) added 3.7t of gold in May, increasing its total gold reserves to 765.1t.

Looking ahead

  • Retail demand is expected to remain soft in June as the wedding season ends and the crop season begins ahead of the monsoon
  • With soft demand and ample inventories, the local market remained in discount, averaging US$5-6/oz during the first three weeks of June 
  • Gold ETFs in India have seen small positive inflows so far in June, likely driven by continued market volatility and a depreciating rupee 
  • Latest data from the RBI shows that official gold reserves remain unchanged from the end of May at 756.1t (as of 10 June). 

Retail demand improved and imports jumped

Retail demand remained strong y-o-y during the first three weeks of May due to robust Akshaya Tritiya sales, wedding demand and the lower base period of 2021.3 But demand softened during the last week of the month due to a higher gold price and fewer auspicious marriage dates. Indian official imports in May were 98t – significantly higher than official imports in April (27.1t) and those of May 2021 (11.4t) (Chart 1). This rise in imports was driven by:

  • wedding demand during the month 
  • a lower custom tariff of US$592/10gm from 14 May until the end of the month compared to the previous tariff of US$608/10gm; this lower landed cost of gold explains why 59% of official imports arrived in India during the second half of the month.4

Chart 1: Indian gold official imports jumped in May 2022

Indian monthly official imports from January 2019 to May 2022

Source: Metals Focus, Ministry of Commerce and Industry, World Gold Council

The softness in demand is expected to continue into June. It marks the end of the wedding season and a pick-up in sowing activity by rural communities as the monsoon approaches. Official imports are expected to be lower during the first half of June but could rise following a further reduction in the custom tariff (US$585/10gm from 16 June compared to the previous level of US$597/10gm, effective from 1 June).

The local market flipped back to discount by end of month

With improved demand the domestic gold price premium surged to US$4-5/oz by the third week of the month compared to a discount of US$7-10/oz at end of April. Softness in retail demand due to fewer auspicious wedding days pushed the local market back into a discount of US$3-4/oz by the end of May (Chart 2).5

Based on our interactions with the local trade, a substantial amount of official imports that were landed in the second half of May remain in vaults due to weak demand. This, combined with already ample inventories, has caused the local market to remain in discount, averaging US$5-6/oz during the first three weeks of June.

Chart 2: Local market flipped back to discount by end of May as retail demand softened

National Commodity & Derivatives Exchange Limited (NCDEX) polled premia/discount for domestic gold spot price vs landed gold price in India

Source: NCDEX, World Gold Council

May inflows into Indian gold ETFs were modest

Indian gold ETFs witnessed modest net inflows during the month (0.4t), primarily driven by the macroeconomic backdrop of higher inflation and a depreciating rupee. The net inflows lifted total gold ETF holdings to 38.9t by the end of the month (Chart 3). Net inflows have continued so far in June, with 0.2t added in the first three weeks of the month. We believe that market volatility and a depreciating rupee have been the primary investment drivers.

Chart 3: Indian gold ETFs saw third consecutive month of net inflows

Source: Bloomberg, Respective ETF providers, World Gold Council

The RBI added 3.7t to its gold reserves

The RBI added 3.7t to its gold reserves in May, the highest monthly addition since December 2021 (also 3.7t). This took total gold reserves to 765.1t (7.5% of total reserves) (Chart 4).6 The RBI has made no further gold purchases so far in June (to week ending 10 June). According to our 2022 annual central bank survey gold continues to be viewed favourably by central banks as a reserve asset, with 25% of respondents planning to increase their gold reserves (up from 21% last year).7

Chart 4: RBI added 3.7t to its gold reserves in May

Source: IMF, RBI, World Gold Council

1Based on the MCX Gold Spot price in INR as of 31 May 2022. June price is based as of the day ending on 22 June 2022

2Akshaya Tritiya is a major gold buying festival in India. Akshaya Tritiya was celebrated on 3 May 2022.

3Indian retail demand was severely impacted in May last year due to the restrictions and store closures that were implemented to contain the second wave of COVID-19.

4Landed cost of bullion in India is calculated by adding custom duty on gold bullion to the international gold price. The custom duty calculation is derived from the published custom tariff value.

5The premium/discount data is based on the gold premium polled spot price from National Commodity & Derivatives Exchange Ltd.

6Central bank data is taken from IMF-IFS: IFS up until April and weekly statistics from the RBI for May. May’s purchases are as of the week ending 27 May 2022. Please refer to our latest central bank statistics.

7Central Bank Surveys in 2022 and 2021 were based on responses from 56 central banks in each year.

This article is republished with permission from the World Gold Council.

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