India Leads Gold Investment Boom in Asia with Reduced Import Duty
New Delhi, India – Asia has been attracting gold investments for 17 months straight, with a significant USD 438 million influx in July, according to a report by the World Gold Council. India has been at the forefront of these investments, thanks to a reduction in gold import duty from 15% to 6% announced in the Union Budget.
As of July 23, India’s import duty on gold was reduced to 6%, which has positively impacted the gold market. In July, gold prices in India reached Rs 65,314 per 10 grams, marking a 4.5% return for the month and a 17.5% year-to-date return. This strong performance has driven inflows into Indian gold Exchange Traded Funds (ETFs), making gold a more attractive investment.
Globally, gold prices also saw a recovery in July, closing the month 4% higher at USD 2,426 per ounce. The precious metal even hit an all-time high of USD 2,480 per ounce mid-month. This surge was driven by lower 10-year Treasury yields and a weaker US dollar. However, the Commodity Exchange (COMEX) futures market saw a decrease in the futures market ratio due to an increase in open interest not fully matching the rise in net longs.
Global gold ETFs had their strongest month since April 2022, attracting USD 3.7 billion in July. This marked the third consecutive month of net inflows, with Western funds leading the charge. The total assets under management (AUM) for global gold ETFs reached a new peak of USD 246 billion, with collective holdings increasing by 48 tons to 3,154 tons, the highest level since January.
Asia has been a standout performer, recording inflows of USD 3.6 billion year-to-date, significantly outpacing other regions. The total AUM of Asian gold funds reached an all-time high of USD 15 billion, with collective holdings increasing by 47 tons.
Gold trading volumes surged across all markets in July, averaging USD 250 billion per day, a 27% increase month-over-month. This rise was driven by stronger activity in the London Bullion Market Association (LBMA) and a 51% increase in volumes across major exchanges, with COMEX leading the way.
As gold enters August, it traditionally benefits from seasonal tailwinds, particularly from weaker bond yields. However, several factors could impact its performance, including market sentiment and the Federal Reserve’s cautious approach ahead of elections. The upcoming Democratic National Convention and potential market sell-offs driven by disappointing Q2 earnings from US tech giants could further support gold.
Doubts Revealed
Gold Investment Boom -: A ‘Gold Investment Boom’ means a lot of people are buying gold as an investment, hoping its value will go up.
Import Duty -: An ‘Import Duty’ is a tax that the government charges when goods are brought into the country from abroad.
Gold ETFs -: Gold ETFs (Exchange-Traded Funds) are like special stocks that represent gold. When you buy a Gold ETF, it’s like buying a piece of gold without actually holding it.
USD 438 million -: USD 438 million means 438 million US dollars, which is a lot of money. It’s used to show how much money was invested in gold.
Per ounce -: An ‘ounce’ is a unit of weight. When talking about gold, it means how much one ounce of gold costs.
Inflows -: Inflows mean money coming into a place, like investments coming into a country or a fund.
Year-to-date -: ‘Year-to-date’ means from the start of the year until now. It shows how much has happened in that time period.