Indian gold demand dropped 14% year-on-year to 842.7 tonne in 2014 — far worse than a 4% drop globally — despite a spurt in demand for jewellery to record levels, mainly due to an unfavourable base, according to World Gold Council (WGC). In value terms, overall demand touched Rs 2,08,979.2 crore in 2014, down 19% from a year before, it said.
WGC managing director (India) Somasundaram PR told FE that the slump in demand in the world’s second-largest bullion consumer has been caused primarily by excessive purchases of bars and coins in 2013. He projected gold demand to rise to anywhere between 900 and 1,000 tonne this year.
“As we all know, 2013 was an exceptional year and gold demand was as high as 975 tonne. So the base for calculating growth in demand in 2014 was quite unfavourable. Moreover, official restrictions on gold imports and subsequent ban on sale and manufacture of coins prompted people to change the form of gold purchase to jewellery from bars and coins (typical investment items). So while jewellery demand hit a record of 662 tonne last year, investment demand dropped,” he said.
However, buyers who had purchased gold coins and bars extensively in 2013 and deferred purchases last year are expected to be back in the market in 2015, he said, adding that gold demand would get a boost from that.
Gold imports are estimated at 769 tonne in 2014, compared with 825 tonne a year before. “Supply through the grey market was around 175 tonne. If there is relaxation in policy, duty cuts and transparent pricing this year, the grey market supply of gold will be significantly reduced,” he said.
Jewellery demand in India in 2014 touched 662.1 tonne, up 8% from a year before, while investment demand last year was down by a half at 180.6 tonne from the 2013 level. In value terms, gold investment demand saw a fall of 53% at Rs 44,847.1 crore from Rs 95,460.8 crore in 2013.
Total gold recycled in India fell 23.5% in 2014 to 77.1 tonne as compared to 100.8 tonne in 2013. Softer prices, which remained stable in 2014, provided less incentive to sell the metal, Somasundaram said.
Gold demand in India grows 2% in Oct-Dec
India’s gold demand in the October-December quarter went up 2% to 223.2 tonne, compared with 218.7 tonne a year before. In value terms, gold demand witnessed a fall of 4% at Rs 53,342.6 crore in the December quarter from a year earlier.
However, jewellery demand rose 19% at 179.1 tonne, while investment demand was down by 35% at 44.1 tonne in the October-December period from a year earlier.
Global demand falls 4% in 2014
Global gold demand declined 4% to 3,924 tonne in 2014, and Chinese demand dropped after hitting a record level in 2013, the World Gold Council said.
“The year 2014 was a year of stabilisation and innovation in the gold market with annual gold demand down by just 4% at 3,924 tonne
after the record-breaking level of buying seen in 2013. It was a standout year for Indian jewellery despite government restrictions on gold imports, reinforcing the nation’s affinity with gold,” World Gold Council managing director, investment strategy, Marcus Grubb said.
Chinese gold demand returned to the levels last seen in 2011 and 2012 as consumers and investors took time to digest the substantial
volumes accumulated in 2013, he said.