Chennai: Despite the sharp rise in gold prices, the central banks will continue to add gold to their reserves in FY25. Meanwhile, jewellery consumption in FY25 is expected to shrink in volume terms.
The demand for gold from central banks is expected to remain robust in FY25. As per the data from a survey done by the World Gold Council, more than eight in ten central bank reserve managers are expected to increase their gold holdings in the next 12 months. This view of gold from reserve managers persists despite two successive years of record central bank purchasing and the gold price hitting new all-time highs in 2024.
According to the report, reserve managers indicate that they find that gold will help mitigate risks and prepare for further political and economic uncertainty, globally.
Although 71 per cent still view gold’s legacy as a reason to hold it, gold’s long-term value is considered a reason by 88 per cent, performance during crisis by 82 per cent, and its role as an effective portfolio diversifier by 76 per cent.
Meanwhile, ICRA expects jewellery consumption growth in volume terms to contract in FY2025 after a muted volume growth of 2 per cent and 4 per cent in FY2023 and FY2024. In value terms, jewellery consumption may moderate to 6-8 per cent in FY2025 against a sharp 18 per cent expansion in FY2024.
This will be due to the sharp rise in gold prices in recent months and the consequent impact on consumer sentiments of postponing non-essential purchases. Consumers are expected to remain watchful of the price movements and adjust to the new price levels over two or three quarters.
The current gold prices are higher by 19 per cent over the FY2024 average and remain exposed to the confluence of factors like the global macro-economic environment, geo-political tensions, inflation, and currency movements.
According to Sujoy Saha, Vice President and Sector Head, ICRA, wedding and festive demand is likely to be relatively muted amidst a relatively lower number of auspicious days in FY2025.
