India’s gold demand in the April-June quarter tumbled 39% to 204.1 tonnes from a year earlier, compared with a 16% decline globally, as an unfavourable base kicked in and consumers deferred purchases anticipating prices to fall further, according to a report by the World Gold Council (WGC).
Although the WGC expects Indian appetite to revive in the second half of the current calendar year, the miners’ body trimmed its demand forecast range for the country to 850-950 tonnes for 2014, against 900-1,000 tonnes announced earlier. Still, successive years of huge purchases from overseas have made Indians the largest hoarders of gold, as stocks with domestic households have hit a record 22,000 tonnes worth over $1 trillion, WGC managing director (India)
Somasundaram PR said.
Demand for gold between April and June last year had hit a record 337 tonne, as people scrambled for purchases to take advantage of a sharp drop in gold prices globally. Somasundaram said while June quarter demand trailed last year’s level, it was better than the 181 tonnes recorded in 2012.
According to the WGC data, jewellery demand in the last quarter fell 18% to 154.5 tonnes, investment demand crashed 67% to 49.6 tonnes from the previous year.
Demand in the first half of 2014 dropped to 394.40 tonnes, down 34% from a year ago.
Somasundaram said gold demand would rebound in the second half of the calendar year on price stability and better official supply. A better-than-expected monsoon scenario and wedding season would prop up demand, he added.
Already, gold imports in June more than doubled to $3.2 billion from the April level of $1.7 billion, in a sign demand may pick up in the coming months after the Reserve Bank of India stepped in to ease a supply crunch in May by allowing more entities to import the precious metal.
However, any rise in gold demand would impact the current account deficit, as a 57% fall in gold imports in the June quarter had helped drive down the merchandise trade deficit by 31%. The country's CAD dropped to $32.4 billion in the last fiscal, compared with a record $88.20 billion a year earlier, as the government cracked down on gold imports.