MUMBAI: Led by covid-related disruptions, bleak consumer sentiment, and high prices amid volatility, demand for gold in India remained under pressure in the three months ended September even as it rose sequentially.
According to data from the World Gold Council, India’s demand for gold fell 30% year-on-year to 86.6 tonnes during July-September but was way higher than the 64 tonnes in April-June, which was a 70% drop year-on-year.
According to WGC, the easing of lockdown curbs and low prices in August had provided a small window of buying opportunities and helped revive demand for the yellow metals in India. July-September is a seasonally weak quarter in India because of the monsoon and inauspicious periods like Pitru-Paksh and Adhik Maas.
World Gold Council expects demand in India to revive as Dussehra, Dhanteras and other festivals along with the wedding and post-harvest seasons are likely to boost purchases. “This year, a good monsoon notwithstanding, price and covid shadow will affect sentiment, though we can reasonably expect at least a part of the pent-up demand to surface. But as weddings and festivities become low-key affairs, savings on other spends could be channelised into gold,” it said.
As per the Council, a sense of cautious optimism has returned among the trade stemming from the fact that the world is gradually learning to live with covid. With uncertainties arising due to the fear of a second wave of covid, WGC will not be able to quantify the impact on the full year gold demand in India other than to say that demand could be multi-year low.
In the quarter under review, gold jewellery demand in India fell by 48% to 52.8 tonnes while the yellow metal’s safe haven appeal and an anticipation of a rise in prices paved the way for an increase in investment demand for gold bars and coins by 51% to 33.8 tonnes.
However, lockdown led to rapid rise in digital engagement with several tech initiatives by top jewellers to woo buyers. Digital platforms selling allocated gold through wallets also recorded sharp rise in volumes, along with significant activity in gold exchange traded fund (ETFs) following a prolonged period of quiescence.
Due to higher prices, recycling in India rose 14% to 41.5 tonnes though inventory rationalisation by jewellers and steep discounts in the market did impact full price recovery for sellers. Gold imports in India resumed in anticipation of festival demand as supply chain-related restrictions were eased, growing from 9 tonnes in the previous quarter to 90.5 tonnes and up 8% y-o-y.
Globally, demand for gold in July-September fell to 892.3 tonnes – the quarterly total since Q3 2009 – as consumers and investors continued to battle the effects of the pandemic. At 2,972.1 tonnes, year-to-date demand is 10% below last year’s. Although jewellery demand improved from the Q2 record low, the combination of continued social restrictions, economic slowdown and a strong gold price proved onerous for many jewellery buyers.
As China continued to return to post-lockdown normalcy in July-September, jewellery demand recovered from its Q1 lows but remained soft compared to 2019.