India lost its tag of the world's largest gold consumer to China, which lapped up 1,065.8 tonnes of the precious metal in 2013, says a World Gold Council report.
At 29% and 38%, China recorded stronger growth in annual jewellery and bar & coin consumption compared to India ( 11% and 16% in that order). Data shows that in 2012, both India and China recorded about 552 tonnes of gold consumption through jewellery. However, in 2013, India's jewellery related demand was at 613 tonnes, significantly lower than that of China (711.4 tonnes).
The reason for a boost in China's demand was a strong buying activity the second quarter of the year when averaged prices remained on a lower side. The Chinese new year led the demand again and supported consumption in the fourth quarter.
India on the other hand witnessed a sharp jump in price premiums compared to international prices due to a combination of weaker rupee and stringent supply restrictions. “Indian consumers therefore missed the opportunity to buy gold at lower levels during the second half of the year unlike in many other markets,” notes the report.
The higher premiums were substantiated by the average domestic prices in the second half of 2013. While aggregate international prices in the period at $1,301 per ounce was 23% lower than the same period last year, the MCX spot prices in the last six months averaged at Rs 29,929 per 10 gm, only 3% lower than the previous year.
As restrictions weighed on the net imports in the country in 2013 even as the underlying demand remained robust, unofficial channels filled the demand gap. As per WGC's estimates, nearly 150-200 tonnes of yellow metal made its way in the domestic market through unofficial channels, though official imports in 2013 stood at 825 tonnes. The annual net import was the lowest since 2009, between 2010 and 2012 it averaged at 916 tonnes.
Meanwhile, the global demand for yellow metal dropped for a second consecutive year in 2013, to its lowest since 2008. The total annual consumption in 2013 fell by 15% to 3,756 tonnes as investment demand through exchange traded products fell for the first time in a decade. Even central banks, which have turned net buyers of gold since the last four years, moderated their purchases in 2013. They accumulated 369 tonnes of gold in 2013, compared to