After a tepid March and April, Indian gold demand surged during an important May festival.

India ranks as the second-largest gold market in the world behind only China.

Moderating prices helped drive a resurgence in gold demand ahead of and during the Akshaya Tritiya festival on May 10. According to the World Gold Council, anecdotal evidence indicates gold demand "exceeded expectations."

Record gold prices in rupee terms have created headwinds for Indian gold demand in recent months. With some profit-taking in the market, the gold price moderated somewhat after a peak in mid-April. Even so, gold was up 4 percent last month after an 8 percent gain in March. The price of gold in rupees is up about 15 percent on the year.

According to the WGC, festival gold buying was strong in both urban and rural areas. While official data isn't in, there is an indication that there was record buying in rupee terms. This happened despite prices being 20 percent higher than in 2023 and a shorter festival than last year. A World Gold Council analyst speculated that "consumers likely accepted gold’s higher price and may have a positive view of its trend."

"Anecdotal accounts from jewelers and various industry stakeholders suggest that there was significant pre-booking of gold jewelry, bars, and coins well before the festival, as consumers took advantage of the moderation in price from its April peak. Additionally, there was notable demand for wedding jewelry - typically heavier pieces - despite the busy wedding season being some months away."

There was also a resurgence in Indian gold imports last month.

The country imported about 50 tons of gold in April, up from 34 tons in March. In dollar terms, April gold imports were double the prior month.

Meanwhile, the Reserve Bank of India has also gone on a gold-buying spree. According to the latest data released by the RBI, the Indian central bank increased its gold reserves by 24 tons through the first four months of the year. The RBI added 16 tons of gold to its holdings through the entirety of 2023.

Indians have historically had an affinity for gold. Indian households own an estimated 25,000 tons of gold, and that likely understates the amount given the large black market in the country. Gold is deeply interwoven into the country’s marriage ceremonies and cultural rituals. Indians have long valued the yellow metal as a store of wealth, especially in poorer rural regions. Around two-thirds of India’s gold demand comes from beyond the urban centers, where large numbers of people operate outside the tax system.

Gold isn't considered a luxury in India. Even poor Indians buy gold. According to a 2018 ICE 360 survey, one in every two households in India had purchased gold within the last five years. Overall, 87 percent of Indian households own some gold. Even households at the lowest income levels in India hold some of the yellow metal. According to the survey, more than 75 percent of families in the bottom 10 percent of income managed to buy some gold.

The yellow metal was a lifeline for Indians buffeted by the economic storm caused by the government's response to COVID-19. After the Indian government locked down the country, banks tightened credit to mitigate the default risk. Unable to secure traditional loans, Indians used gold to secure financing. As Indians endured a second wave of lockdowns, many Indians resorted to selling gold outright to make ends meet.