Indian gold futures surged to an unprecedented level on Monday, following a global uptrend and impacting demand in one of the world's largest gold consumer markets. According to a report by news agency Reuters, domestic gold futures climbed to Rs 69,487 per 10 grams, marking a nearly 10 per cent increase since the beginning of 2024.
Factors contributing to this surge include a significant drop in gold imports, expected to plummet by over 90 per cent in March compared to the previous month due to ongoing challenges stemming from the Covid-19 pandemic.
Investor preferences for gold over traditional financial instruments have also been bolstered by expectations of persistently low interest rates. Geopolitical tensions, particularly the Russia-Ukraine conflict and the expansion of conflicts in regions like the Red Sea, further amplify gold's appeal as a safe-haven asset.
Despite the traditional demand for gold in Indian weddings, jewellers anticipate a dampening effect on consumer demand due to the soaring prices, reflecting in the declining imports of the precious metal.
This surge in gold futures underscores the complex interplay between global economic trends, geopolitical uncertainties, and local consumer behaviours shaping the precious metal market in India.
Meanwhile, last month, the Finance Ministry instructed all state-owned banks to conduct a thorough review of their gold loan portfolios due to observed instances of non-compliance with regulatory standards by the government.
In a communication addressed to the heads of public sector banks, the Department of Financial Services (DFS) has urged them to examine their systems and processes concerning gold loans. This directive, issued last month, advises banks to rectify any discrepancies related to fee collection, interest, and closure procedures for gold loan accounts.
The communication highlights several concerns, such as the disbursal of gold loans without the required collateral, irregularities in fee collection, and cash repayment issues.