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Gold jewellery investment demand remains high in India

posted onJuly 30, 2017
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Throughout history, precious metals and gemstones have proved endlessly fascinating to mankind. Of all the precious metals, gold is the most popular as an investment. From pharaohs to hedge funds, the yellow metal has been an important tool of building and protecting wealth and traditionally, investors have acquired it as a source of security in times of political and international unrest, or economic uncertainty. For many centuries precious metals, often combined with gemstones, have been the normal material for jewellery. 

gold and gemstones

Market research analysts at Technavio predict that the global gems and jewellery market will grow steadily at a compound annual growth of over 6% by 2021. According to the report, one of the major drivers for this market is economic growth, expanding middle class population, and inflationary pressures.

China and India are the major consumers of gold jewellery and the increase in demand for gold jewellery in these markets is due to certain factors.These are economic growth, rising middle-class population base, and increased aspiration of purchasing gold jewellery among the middle-class population base. The increase in income levels has boosted the demand for gold in these markets.

Kalyan Jewellers
Kalyan Jewellers

Another study, by Diamond Insight, a London-based diamonds mining entity, confirms just that.

“While US demand drove global growth in 2016, it is increasing demand from emerging markets that is behind the last five years being the strongest on record. Despite some markets facing challenging conditions last year, we see this trend continuing, with improvements in demand from China and India, in particular, emerging in 2017” reads the report.

Further, the World Gold Council's latest Gold Demand Trends report finds that global jewellery demand was up 1% at 481t in the first quarter of the year, compared with 474t in Q1 2016. Gains in India were the main reason for the slight year-on-year increase.

Gold necklaces by Tiffany&Co.
Tiffany&Co.

Indian consumers enjoyed a period of relative stability in the domestic market, lifting demand 15% year-on-year to 124t. Continued remonetisation by the Reserve Bank of India buoyed consumer sentiment, which encouraged demand ahead of the auspicious wedding season, albeit from a low base.

Investing in gold jewellery has been driven primarily by culture and tradition. Many of the gold jewellery consumers also view the yellow metal as a great store of wealth and more valuable than money.  Such factors will contribute to the growth of this industry segment in the coming years. Finally, the Technavio study estimates that in terms of geographic regions, Asia Pacific Countries (APAC) will be the major revenue contributor to the market by 2021.