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India’s Gold Demand Drops 36 per cent Between Jan-Mar Quarter: World Gold Council

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India’s Gold Demand Drops 36 per cent Between Jan-Mar Quarter: World Gold Council
Aparajita Gupta - 30 April 2020

New Delhi, April 30: Demand for gold in India for January-March quarter (Q1) 2020 was at 101.9 tonnes down by 36 per cent as compared to overall Q1 demand for 2019 (159 tonnes) due to the economic uncertainties brought in by the novel coronavirus (COVID-19) outbreak, said World Gold Council in its latest report.

India’s Q1 2020 gold demand value was Rs 37,580 crore, a drop of 20 per cent in comparison with Q1 2019 (Rs 47,000 crore).

“Indian gold demand in Q1, 2020 dropped 36 per cent to 101.9 tonnes due to a combination of factors such as high and volatile prices, economic uncertainties and towards the end of the quarter, severe logistical freeze following lockdown. Investment demand, though lower by 17 per cent at 28.1 tonnes, was relatively better as sentiments towards equities turned negative and investors turned to gold’s liquidity and safe-haven status,” said Somasundaram PR, Managing Director, India, World Gold Council.

“Wedding demand during the first few weeks of the quarter did appear to bring in some seasonal cheer. However, later developments, more particularly since the beginning of March, disrupted the market and consumer confidence, resulting in a sharp drop in jewellery demand by 41 per cent to 73.9 tonnes,” he added.

Total jewellery demand in India during the quarter was down by 41 per cent at 73.9 tonnes as compared to Q1 2019 (125.4 tonnes). The value of Jewellery demand was Rs 27,230 crore, a drop of 27 per cent from Q1 2019 (Rs 37,070 crore).

Somasundaram said jewellery demand is at an 11-year low.

Total investment demand for Q1 2020 was down by 17 per cent at 28.1 tonnes in comparison with Q1 2019 (33.6 tonnes). In value terms, gold investment demand was Rs 10,350 crore, a rise of 4 per cent from Q1 2019 (Rs 9,940 crore).

Total gold recycled in India in Q1 2020 was 18.5 tonnes, as compared to 16.1 tonnes in Q1 2019, a rise of 16 per cent compared to Q1 2019.

“Life-time high prices of gold expectedly increased recycling by 16 per cent. Recycling and collateralised loans against gold may be expected to grow exponentially in the next few quarters as the immediate economic impact of the lockdown becomes evident and hopefully, fundamental reforms follow, easing business sentiment. In that scenario, gold may become a tool for the revival of many SME businesses and household fortunes. This perhaps presents an opportunity that could revive GMS (Gold Monetisation Scheme) in a consumer-friendly manner,” said Somasundaram.

He was hopeful that consumer sentiment could receive a boost with the arrival of a normal monsoon as predicted by IMD.

He added, “Issues of the integrity of gold and right price will receive greater consumer attention as gold prices test affordability. A digital transformation of the industry could be a positive outcome of the current crisis, as social distancing, contactless payments, and other behavioural necessities challenge earlier forms of consumer engagement. We are unable to quantify the impact on full-year demand as we do not have sight of several critical factors at play under current circumstances.”

Somasundaram felt that it is the right time to reform the gold industry in India towards a more organised one.

Global gold demand held firm at 1,083.8 tonnes in Q1 2020, a rise of 1 per cent in the same period last year, according to the World Gold Council’s latest Gold Demand Trends report.

The global COVID-19 pandemic fuelled safe-haven investment demand for gold, with gold-backed ETFs attracting huge inflows to push global holdings in these products to a record high of 3,185 tonnes.

Asked given the high price and economic uncertainties whether in India people will still buy yellow metal, Somasundaram said: “Relative demands for bars and coins will be higher. As far as jewellery is concerned people may buy simple jewellery or modular jewellery.”

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