WGC Focused on Leading Drivers of Indian Gold Demand

The demand has been driven by various short term factors as well.

SEATTLE (Scrap Monster):  The latest report published by the World Gold Council (WGC) elucidates on the main drivers of rising gold demand in India- the second largest gold consumer in the world after China.

The WGC report noted that the drivers of gold demand in the country are many and varied. Based on annual data for a period of three decades, it identifies three key long-term drivers that influence consumer demand-income, gold price level and government levies. The demand responds more to income than it does to price. As per analysis, for each 1% rise in per capita income, the gold demand tends to rise by 0.9%. On the contrary, each 1% jump in gold prices results on 0.4% dip in demand.

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The demand has been driven by various short term factors as well. For each 1% increase in inflation, the gold demand has increased by nearly 2.6%. Sharp changes in gold price tend to have impact on short-term demand. Every 1% fall in gold prices leads to 1.2% surge in demand during the same year. The rise in import duties since 2012 has reduced gold demand by 1.2%.

Although monsoon has less of an impact on demand as it used to have in the past, it is still a major driver of consumer behaviour. Every 1% rise in rainfall boosts gold demand in the country by around 0.2%.

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