Bullion Market in India 2023-2028

The bullion market denotes the arena where precious metals, notably gold and silver, are traded. It comprises diverse segments, encompassing physical gold and silver, derivatives like futures and options contracts, exchange-traded funds (ETFs), and over the counter (OTC) trading. Participants in the bullion market range from individual and institutional investors to central banks, bullion dealers, refineries, and other entities engaged in the production, trade, and investment of precious metals. Serving as a platform for price discovery, hedging against economic uncertainties, and facilitating investment diversification, the bullion market plays a crucial role in the broader financial landscape.

Market Insights:

Between April 2023 and June 2023, India witnessed a significant decrease in exports of gems and jewelry, totaling US$ 7.22 billion and reflecting a 28.08% decline compared to the same period in the previous year when exports reached US$ 10.04 billion. Concurrently, during this timeframe, India's gems and jewelry imports amounted to US$ 5.20 billion. It's worth noting that from April to November 2022, there was a positive trend in gem and jewelry exports to key destinations like the UAE, Belgium, Singapore, Thailand, and Switzerland. However, in December 2022, India's gems and jewelry imports recorded US$ 2.27 billion, indicating an 18.69% decline compared to the corresponding period in the preceding year.

Market drivers:

India's bullion market exhibits a heightened sensitivity to global economic factors. In periods of economic uncertainty, geopolitical tensions, or instability in financial markets, investors frequently turn to safe-haven assets, with gold emerging as a preferred choice. The surge in global uncertainty typically results in increased demand for gold in India, driven by investors seeking to safeguard their wealth. Interest rates play a pivotal role in this dynamic. During periods of low interest rates, the opportunity cost of holding gold, which does not generate interest or dividends, decreases, enhancing the appeal of gold. Conversely, higher interest rates may redirect investor funds towards interest-bearing assets, leading to a reduction in demand for gold.

Market challenges:

Being among the leading global consumers of gold, India relies heavily on imports to meet a substantial portion of its demand. This dependence on external sources exposes the country to variations in international prices, currency exchange rates, and disruptions in the global supply chain. Government policies, particularly alterations in import duties and taxes on gold, wield significant influence over the bullion market. Although such measures are commonly deployed to regulate the trade balance and curb the current account deficit, frequent adjustments introduce uncertainty for market participants, potentially affecting the overall cost and accessibility of gold in the domestic market.