In 2022 alone it bought roughly 774 metric tons of gold solely for the production of jewelry.
We’re talking about India.
When they think about precious metals, most investors think about inflation and global uncertainties.
But the jewelry market is actually the second largest source of demand for precious metals.
And right now India is bullish on one in particular…
A History Tied to Jewelry
India’s jewelry connection goes back thousands of years.
Archaeological digs have turned up evidence of jewelry as ornamentation in the Indus Valley, a region to the northwest of what we now know as India, that existed all the way back between 3300 and 1300 BC.
The residents of the region were well known for their metallurgical skills which eventually evolved into today’s jewelry industry.
Over the centuries, their link to jewelry has grown to be more than just an indication of wealth or prosperity. It’s become a part of their cultural heritage.
For the Indian people, jewelry can carry religious and spiritual meanings. The designs can reflect regional identities. Each state has its own unique designs. For example:
…the Kundan jewelry of Rajasthan, known for its stone-inlaid designs, contrasts with the intricate filigree work of Odisha’s silver jewelry.
Jewelry marks certain rites of passage and stages of life. According to Indian jewelry design company Desi Jewelry:
Earrings and anklets for newborns, nose rings for puberty, and elaborate bridal sets for weddings signify transitions in a woman’s life, denoting her social status and familial ties.
Today, two major areas comprise the majority of jewelry demand. According to the World Gold Council…
Bridal jewelry dominates the gold jewelry landscape, enjoying 50-55% of market share; weddings, together with festivals, constitute the two major gold purchase occasions in India.
And that doesn’t include the everyday fashion wear your average Indian will sport.
Their elegant designs and craftsmanship have also made them a top exporter of jewelry to the rest of the world.
There are no two ways about it, India is a major force when it comes to jewelry. That makes them a force in the precious metals industry as well.
And their demand for jewelry goes beyond gold…
A Huge Year for Silver
When it comes to jewelry, India’s demand for gold has long been well known. But what’s less well known is their appetite for silver jewelry as well. The World Gold Council notes:
Aside from gold, India has a sizeable and vibrant silver jewelry market and is the world’s largest fabricator of silver jewelry. Our 2019 consumer survey, carried out by Hall & Partners, found that 60% of the women surveyed owned gold jewelry, closely followed by 57% who owned silver jewelry…
They are the number 2 gold buyer in the world behind China. But when it comes to silver they’re number 1!
In 2022 the country bought a record 8,800 metric tons of silver. This was the result of pent-up demand after the pandemic when economic activity dropped sharply in 2020 and 2021.
And while India’s appetite for silver dipped in 2023 according to the Economic Times of India, the country’s imports over the first four months of 2024 alone surpassed all the silver they bought the previous year making 2024 potentially their biggest buying year ever! (In August alone they imported over 1,400 metric tons.)
And what’s more, this surge in demand comes under some dramatically different conditions. In 2022 the price of silver was generally falling which one might expect to prompt an increase in demand.
However this year we’ve seen the same (or greater) level of demand in an environment of rising prices.
Silver
Aggressive buying into a rally, especially by a participant as savvy as India, is usually an indication that they expect the price to continue heading higher.
And given the global silver market is significantly smaller than other metals markets — like gold — its price is much more sensitive to significant shifts in demand.
Add to that a growing deficit in silver production…
With a combination of historically high demand and falling mine output, the Silver Institute projected a 140 million-ounce market deficit in 2023. And that deficit appears likely to widen further in 2024.
…And you can see why India may be a major driver of higher silver prices in the new year.
