On average, Switzerland refines 70% of the world’s gold, meaning it exports the precious metal in bulk. In October, especially, Switzerland’s exports reached a five-month peak as India’s purchase rates surged ahead of its festive season. Switzerland achieved its highest gold export level since May, with its primary consumers being India and China.
India and China’s local demand rates depend heavily on the season, as specific holidays impact when consumers want to buy precious metals. In India, consumers purchase gold around auspicious Hindu celebrations like Diwali, Dhanteras, and the wedding season, all of which come during the last quarter. If gold prices are high approaching the beginning of the festive season, India’s retail buying market may plummet, though the nation experienced a perfect environment in October with a dip in prices just ahead of the key purchase dates.
Because of this ideal market, India’s gold imports during October increased by 60% compared to the same month last year, representing a 31-month high. On average, India imports roughly 66 tons of gold per month, though in October, it imported a whopping 123 tons. Even during the festive season, India typically only imports around 70 to 80 tons (according to last year’s purchase rate), showing just how monumental this year’s season has proven to be for the nation’s gold market.
“The Hindu festivals of Dhanteras and Diwali, held earlier this month, tend to be drivers for gold purchases, so dealers stocked up in October,” analysts from Heraeus Precious Metals explained in a recent report.
With October’s data finalized, India’s total gold demand for the third quarter of 2023 comes to 210.2 tons, representing a 10% increase from the same period last year and a 20% leap in bar and coin demand alone. When looking at the third quarter of this year, India’s gold coin and bar demand rate sits around 38% above the nation’s quarterly average, which totals roughly 40 tons. Clearly, this demand directly prompted a surge in imports.
With the surge in Swiss exports, investors in Switzerland also increased gold holdings by 691,000 ounces during October, equating to 6% of the total Swiss funds’ holdings at the time. This follows the trend we’re seeing on a global scale of diversifying using gold ETF investment tools. By the beginning of November, global gold ETF holdings reached 87.3 million ounces.
While increased gold imports in India may not have come as a shock to many, given the approaching festive season, the increased Swiss gold holdings signified a shift in market strategies. The price dip at the beginning of October showed a clear hesitation away from gold on investors’ ends amid high interest rates and high opportunity costs. By the end of the month, geopolitical tensions soared with the war breaking out in the Middle East, and promises of interest rate cuts made gold a more attractive option.
“The reasons for the apparent change of strategy may be the ECB’s softer approach to monetary policy following its first month with no rate increase in 10 months, and a much weakened macroeconomic picture emerging in Europe,” analysts at Heraeus wrote. “Swiss ETF inflow may show that institutions are warming to gold again.”
The U.S. Federal Reserve hinted at a similar dovish strategy, helping give rise to the precious metal. In early October, gold was trading around $1,830 per ounce, and by December 4, the precious metal achieved its all-time performance record of $2,150 per ounce following the extreme Israel-Palestine tensions and Fed committee statements announcing potential rate cuts in the near future.
While this growth in performance may be good news for investors, it could dampen India’s retail market, ultimately reigning in the nation’s rising imports and Switzerland’s export surge. High prices during the peak festive season mean retail buyers will not be able to afford extravagant gold products. Ultimately, this price surge could reduce retail demand in India, eventually bringing the Switzerland-India gold trade back down to typical levels.
When reviewing India’s total gold demand rates throughout this year, the figure sits around 3% below last year’s rate, according to the World Gold Council.
“To match last year’s level of gold consumption, Q4’23 will have to be the strongest quarter for demand in two years,” the World Gold Council explained. “When adding October’s imports to year-to-date demand, this looks possible, though not probable, as without the demand catalysts of the November festivals, the persistently high gold prices in India may crimp demand to the end of the year.”