2018 forecast stands: India gold demand drops 12% in January-March, says WGC

By: | Updated: May 4, 2018 1:46 AM

After a rebound last year, India’s gold demand dropped 12% in the January-March quarter to 115.6 tonne, compared to a 7% fall globally, according to data released by the World Gold Council (WGC) on Thursday.

gold, gold market, portfolio diversification tool, gold pricesDemand expected to recover in June quarter if robust sales during Akshaya Tritiya are any indication.

After a rebound last year, India’s gold demand dropped 12% in the January-March quarter to 115.6 tonne, compared to a 7% fall globally, according to data released by the World Gold Council (WGC) on Thursday. However, demand is expected to recover in the June quarter, if the robust sales by the organised trade on the auspicious day of Akshaya Tritiya are any indication, WGC managing director (India) Somasundaram PR told FE.

In value term, gold demand fell 8% to Rs 31,800 crore during the March quarter. Gold imports, too, dropped 41% to 153 tonne between January and March. “The drop in demand can be attributed to a number of reasons, including the rising local gold prices, a substantial drop in the number of auspicious wedding days against a year earlier, deferring purchases on anticipation of an import duty cut in the Union Budget,” Somasundaram said.

Even the transition to the goods and services tax (GST) regime, although good for the sector in the long run, weighed on demand. The unorganised trade still accounts for an overwhelming portion of the jewellery and bullion market in India.

The WGC also retained its 2018 demand forecast for India, the world’s second-largest consumer, at 700-800 tonne. Somasundaram said the full-year demand could finally be on the higher side of this range. All signs — expectation of higher economic growth and good monsoon, policy focus on doubling farm income, ease of doing business under the GST regime, rural push in the Budget — suggest a good run ahead for the precious metal, he added. India’s gold demand had rebounded in 2017 with a 9% rise to 727 tonne when global consumption had hit an eight-year low.

Various measures announced in the Budget 2018-19, such as the development of a comprehensive gold policy and the creation of a gold exchange, are positive for long-term gold demand, he added. Jewellery demand during the January-March quarter declined 12% to 87.7 tonne, while consumption for investment was down 13% to 27.9 tonne.

In value terms, jewellery demand eased 7% to Rs 24,130 crore, while investment demand declined 9% to Rs 7,660 crore. The volume of gold recycled also dropped 3% during this quarter to 14.1 tonne. Global demand falls, too Gold demand globally had a weak start to 2018, reaching 973 tonne, the lowest first quarter since 2008.

“This was largely caused by a fall in investment demand for gold bars and gold-backed exchange-traded funds (ETFs), as a subdued gold price environment hampered demand,” the WGC said. Global jewellery demand was roughly flat at 488 tonne between January and March, down 1% from a year ago. However, investment demand crashed 27% to 287 tonne, although the central bank demand grew 42% to 116 tonne.

Alistair Hewitt, head of market intelligence at the WGC, said: “Although demand was down year-on-year, we saw encouraging levels of jewellery demand in China, the US and Europe, continued growth in the technology sector and steady inflows into ETFs, albeit at a slower pace than last year. Solid inflows into central bank reserves also highlight the ongoing relevance of gold as a strategic asset for institutional investors.”

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