India’s gold jewelry market is experiencing a resurgence, showing resilience even as demand faltered globally last year. Thanks to a reduction in import duties in July, the decline in gold jewelry demand for India was limited to just 2%. As the price of gold continues to soar, Indian jewelers and retail traders are increasingly exploring options on gold futures, leveraging this financial instrument both for speculation and to safeguard their physical holdings.

Growing Interest in Gold Options

The latest trends reveal that as gold hits record highs this year, the allure of trading options on gold futures is growing stronger. According to Sugandha Sachdeva, founder of SS WealthStreet, these options are not only more affordable than futures but have also become increasingly attractive due to the recent bullish behavior of gold prices.

• The average daily turnover for gold futures options on the Multi Commodity Exchange of India Ltd. shot up to 605 billion rupees (approximately $7 billion) in February, marking a significant 26% of the total options volume on the exchange. This is the highest proportion recorded since October 2021.

• While crude oil options still dominate trading, their share has decreased from over 70% last year to 52%.

Market Sentiment and Economic Factors

The surge in gold trading is largely attributed to concerns regarding economic policies, particularly those of former US President Donald Trump, which have pushed investors toward safer assets like gold. Since Trump’s inauguration in January, gold prices have climbed by more than 7%.

Gnanasekar Thiagarajan, director at Commtrendz Research, commented on the situation: “Trump’s unpredictable tariffs create an environment of uncertainty, ultimately benefiting gold.” This ongoing volatility in U.S. economic policies is expected to maintain a favorable outlook for gold investments.

Cultural Significance of Gold in India

In India, gold is more than just a financial asset; it holds cultural and religious significance. The country’s affinity for gold has allowed it to reclaim its status as the largest jewelry market, despite a broader decline in global demand. The February surge in gold prices has seen trading volumes for options on gold futures nearly triple compared to the average for 2024.

Meanwhile, the average daily turnover for oil futures options has plummeted to 1.2 trillion rupees, the lowest since June. As reported by CME Group Inc., gold options trading in the U.S. also saw a near doubling from February 2024.

Future Trends in Gold and Oil Trading

As market dynamics shift, traders are increasingly favoring gold over crude oil options. Rahul Kalantri, vice president for commodities at Mehta Equities Ltd., noted that the current market provides better opportunities for gold trading.

Nevertheless, the ongoing fluctuations in oil futures suggest that this trend may not be permanent. Thiagarajan added, “The relationship between gold and oil is often inverse; good economic news tends to favor oil, while uncertainty drives investors towards gold.”

In light of the prevailing concerns over economic growth rates in India and stock market fluctuations, gold is likely to remain a favored asset among investors. As the market evolves, gold’s status as a safe haven continues to shine brightly.