Steady inflows in Asia & rising demand in India!

Gold ETFs show resilience amid global economic shifts 

Recently, the World Gold Council published their Gold ETF Commentary for the September 2024. The Report said, once again, the region saw FX hedging related inflows, albeit at a slower pace than August, driven mainly by continued strength in local currencies against the dollar. 

Asian funds attracted US$175mn in September, extending the region’s inflow streak to 20 months. India again saw strong inflows, driven by factors not too dissimilar from previous months. At the same time, the strong gold price momentum and elevated geopolitical risk were contributors. 

Increasing net longs were mainly contributed by money managers – their net positions reached 793t as of September, 8% higher than the end-August level and 84% above the H1 average of 430t. Similar to previous months, gold’s eye-catching performance and investors’ rising bets on the Fed’s future rate cuts were main drivers.

In the context of Fed Rate, Colin Shah, MD, Kama Jewelry had remarked now he said about the RBI MPC that, “RBI’s decision to keep the repo rate unchanged for the 10th straight time comes as per the industry expectations. 

The big development was the change in policy stance that now indicates a low-rate regime in the near future.  

The FY25 inflation is projected at 4.5%, well within the RBI tolerance band. The MPC's focus on addressing the system's liquidity and managing inflation will help address concerns around it. 

The recent uptick in food, and metal prices may pose an upside risk for the CPI. Nevertheless, the GDP growth projection for FY25 at 7.2% shows that India's growth story is on the right path and will continue to remain intact.  

Prolonged geo-political tension in the Middle East will continue to remain a big concern and could further lead to a slowdown in trade activities of gems and jewelry, which will only gain some stability once the situation is normalized.”  

In the row, Sachin Jain, Regional CEO, India, World Gold Council said, “We've seen an increase in both physical gold purchases and interest in gold ETFs after the recent reduction in import duties. India's gold demand is expected to grow in the coming months due to higher rural purchasing power from a good monsoon, the festive season, and government pro-gold policies.  

Anecdotal feedback suggests manufacturers and retailers have done new product lines and are prepared to cater to the consumers. The festive and wedding season starting with Navratri will further drive the demand peaking around Dussehra.  

Gold purchases are anticipated to be robust during the festive season, symbolising auspiciousness, leading up to Diwali in end October and a busy marriage season from December to February.”  Comex total net longs continued to rise, reaching 976t by the end of September, a 6% m/m rise and the highest month-end level since February 2020.