Demand for gold in the third quarter of 2022 was 28 per cent higher year-on-year at 1,181 tonnes, thus taking it to its pre-pandemic levels, said World Gold Council in its latest report.
According to the council, consumers and central banks bolstered demand for the yellow metal, although there was a notable contraction in investment demand.
"Investment was down 47 per cent year-on-year, as ETF investors responded to a challenging combination of markedly higher interest rates and a strong US dollar with significant outflows of 227 tonne," it said in the report.
The tepid investment has contributed to an 8 per cent quarter-on-quarter drop in the price during Q3 2022.
"Despite these headwinds, gold continued to hold favour with retail investors who reacted to different market cues and turned to gold for its status as a store of value amidst rampant inflation and geopolitical uncertainty," it said.
Investors globally sought to hedge inflation with bar and coin investment, driving total retail demand up 36 per cent year-on-year. This was supported by significant purchasing in Turkey (up more than fivefold y-o-y) and in Germany (up 25 per cent y-o-y at 42 tonnes), but also from visible contributions across all major markets.
Jewellery consumption continued to rebound and is now back to pre-pandemic levels, reaching 523 tonnes - 10 per cent higher compared to Q3 of 2021.
Notably, much of this growth was spearheaded by India's urban consumers who drove up demand by 17 per cent year-on-year to 146 tonnes.
Urban consumers were the engine of Indian demand in Q3, encouraged by a return to pre-Covid levels of economic activity. On the contrary, rural consumers were more cautious as their inflation outpaced that of their urban counterparts.
"Urban India consumers have driven the recovery in gold jewellery demand, as economic activity in these areas has normalised. Credit expansion has added impetus to this demand, with bank loan growth touching a nine-year high by quarter-end," the report said.
Festival and wedding demand, it said, should be supportive but is not expected to match last year's record-breaking fourth quarter, particularly given that higher inflation relative to urban India may crimp demand in the important rural segment.
"Recovery in gold jewellery demand was primarily driven by urban India, more specifically Southern parts, underpinned by robust economic activities with a 17 per cent y-o-y increase in tonnage terms," said Somasundaram PR, Regional CEO, India, World Gold Council.
"Rural demand, however, was impacted by seasonal effect (monsoons) and inflation. On the other hand, Indian bar and coin demand also saw a 6 per cent y-o-y improvement to 45.4 tonnes as retail investors responded to the gold price drop and weaker equity markets, and festivities around Ganpati and Puja festivals after 2 years of covid, saw a huge uplift in consumer sentiment," Somasundaram said.
Looking ahead, Indian retail investment, Somasundaram said, is likely to continue to benefit from safe-haven demand amid rising interest rates and a weakening rupee.
"There's optimism in the overall outlook for the rest of the year with weddings and Diwali demand in Q4, but it is unlikely to match last year's record-breaking Q4. Our gold demand estimate for full year is around 750-800 tonnes similar to last year."
( With inputs from ANI )
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