1. India gold demand seen hitting 7-yr low; WGC predicts rebound in 2017

India gold demand seen hitting 7-yr low; WGC predicts rebound in 2017

India’s gold demand will likely hit a seven-year low to remain in the range of 650-750 tonnes in 2016, the World Gold Council (WGC) said on Tuesday, trimming its earlier forecast of 750-850 tonnes for the year, reports fe Bureau in New Delhi.

By: | Published: November 9, 2016 6:58 AM
Speaking to FE, WGC managing director (India) Somasundaram PR, however, predicted a rebound in demand in 2017, as rural disposable income is set to rise due to a good kharif harvest this year after two years of drought.  (Reuters Image) Speaking to FE, WGC managing director (India) Somasundaram PR, however, predicted a rebound in demand in 2017, as rural disposable income is set to rise due to a good kharif harvest this year after two years of drought. (Reuters Image)

India’s gold demand will likely hit a seven-year low to remain in the range of 650-750 tonnes in 2016, the World Gold Council (WGC) said on Tuesday, trimming its earlier forecast of 750-850 tonnes for the year, reports fe Bureau in New Delhi. The lower projection follows a 28% crash in demand in the September quarter from a year ago to 194.8 tonnes. This was the third quarter of fall and worse than a 10% decline globally, the London-based miners’ body said.

Speaking to FE, WGC managing director (India) Somasundaram PR, however, predicted a rebound in demand in 2017, as rural disposable income is set to rise due to a good kharif harvest this year after two years of drought. Also, since many people deferred gold purchases earlier this year, expecting prices to ease, a lot of pent-up demand will likely spill over to the next year. Already, gold demand has started picking up from Dhanteras onwards, which will reflect in the data for the December quarter.

Somasundaram said even in 2009, gold demand dropped to just 642 tonnes from 823 tonnes in 2008, as the average gold price rose 24.5% that year. However, despite a 19% rise in price in the next year from an already elevated level in 2009, gold demand shot up to touch 1,002 tonnes in 2010.

An elevated price level, a traders’ strike following the introduction of the excise duty, the regulation on PAN card for purchases above Rs 2 lakh and the subdued gold buying sentiments when the income disclosure scheme was running affected demand in the September quarter, Somasundaram said.

The unusual discounts to bullion prices in the unorganised segment caused further disruption to the official trade channels, he added.

gold

Indian demand volume already dropped a massive 29% in the first three quarters of calendar year 2016 from a year earlier to just 441.2 tonnes. In the September quarter alone, investment demand fell 30% while that for jewellery dropped 28%. Last year, gold demand hit a peak of 271.2 tonnes in the September quarter — the highest since the second quarter of 2013 — despite the fact that this period traditionally witnesses subdued sales.

In value terms, however, demand dropped only 15% in the quarter through September this year, thanks to a rise in gold prices. China, India drive down global demand Global gold demand dropped 10% in the September quarter to 993 tonnes from a year earlier, as demand in key markets — China and India — plunged 22% and 28%, respectively. Global jewellery demand fell 21% to 493 tonnes in the quarter through September, driving down overall demand despite a 44% surge in that for investment to 336 tonnes.

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