In the June quarter, India’s gold demand for jewellery contracted by 17% to 88.8 tonnes, according to the Gold Demand Trend report for the second quarter by World Gold Council (WGC) that was released on Thursday. However, there was a 7% increase in demand for physical gold, taking it to 46.1 tonnes despite the rise in prices.
Jewellery demand
The report observed that, ‘Combined with high prices, jewellery demand will likely remain subdued as consumers are anecdotally adapting less quickly to high prices than they have historically.’
The report also noted that with gold price soaring to Rs 1 lakh per 10 grams in India, the jewellery demand of 160 tonnes in the first half of the current year was the second lowest in their data series from H1 2000, when the demand was at 118 tonnes.
Global Jewellery demand (of 341 tonnes) also continued to decline, with the volume of consumption down 14% and nearing low levels last seen in 2020 during the COVID pandemic.
Going forward, the report says that “a seasonal recovery in demand is likely in Q3 as the festive and wedding seasons get underway, the continued high price environment looks set to put ongoing pressure on gold jewellery demand volumes in the country.”
Shift in jewellery sector
The report further says that, ‘The shift towards lighter-weight items continued in the record price environment, with consumers increasingly favouring 18 carat plain gold jewellery due to affordability. Gold-plated silver jewellery is also gaining increasing acceptance. Reflecting this shift in the market, the Bureau of Indian Standards recently approved hallmarking of 9-carat jewellery.’
Given high prices, there was apprehension of higher sales of scrap, that is, encashing gold for cash. However, scrap supply has increased only 1% to 23.1 tonnes despite a nearly 50 % average price increase. This is an important indication of consumers’ belief in gold.
Sachin Jain, Regional CEO, India, World Gold Council, said that this stability suggests that, even at record price levels, consumers are holding on to their gold, reaffirming its status as a prized asset.”
On demand outlook, he stated that, “With total gold demand from January to June at approximately 253 tonnes, we anticipate full-year demand to range between 600 and 700 tonnes.” In 2023, the gold demand was 760 tonnes. So, the WGC seems to be quite pessimistic about gold demand.
On the supply side, gold imports into India have decreased significantly, down 34% to 102.5 tonnes.