Indian demand for gold still remains firm

New Delhi (Mar 19)  It has been reported that Indian official gold imports totalled 91t in February 2021. This represents a 103% move higher year on year and 36.5% higher month on month. The WGC said "We believe that robust retail demand driven by the lower gold price and wedding demand, along with re-stocking by jewellery manufacturers and retailers, drove official imports during the month.".

As there has been a rise in retail demand, the monthly average premium last month (February) jumped to US$3.3/oz vs an average of US$0.6/oz in January. The demand for physical gold is extremely important in Asia but it didn't stop there as the Reserve Bank of India (RBI) added 11.2t of gold to its reserves in February taking its gold reserves to 687.8t, or 6.6% of total reserves. Holdings in Indian gold ETFs also increased by 1.1t ( Rs 4.91bn; US$71.5mn) in February.

Gold has had a massive retracement since hitting the all-time high in August 2020. Could it be that the retracement is the perfect time for investors and physical buyers to replenish their stocks. Looking at the CME gold futures chart below, the volume on the price moves higher have not been significant but this could change. If there is to be some weakness in the greenback then there could be some pent up demand in the yellow metal.

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