Indian gold demand drops 21% ion 2016 after demonetisation, PAN, excise duty took sheen off yellow metal

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New Delhi | Published: February 4, 2017 2:31:46 AM

After a marginal expansion in 2015, Indian gold demand crashed 21% last year to 675.5 tonnes, worse than a 2% rise globally, showed the data released by the World Gold Council

Nevertheless, the country’s gold demand will likely remain in the range of 650 to 750 tonnes in 2017. (Reuters)Nevertheless, the country’s gold demand will likely remain in the range of 650 to 750 tonnes in 2017. (Reuters)

After a marginal expansion in 2015, Indian gold demand crashed 21% last year to 675.5 tonnes, worse than a 2% rise globally, showed the data released by the World Gold Council (WGC) on Friday. A 40-odd day jewellers’ strike, the imposition of an excise duty on jewellery, mandatory requirement of PAN card for purchases beyond a limit and demonetisation bridled gold demand in 2016, the miners’ body said.

WGC managing director (India) Somasundaram PR told FE while latent demand for the precious metal remains robust, a transition to a new indirect tax (goods and services tax) regime and demonetisation could temporarily keep a lid on consumption in 2017.

Nevertheless, the country’s gold demand will likely remain in the range of 650 to 750 tonnes in 2017, he added.

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The 21% decline last year was mainly due to a sharper plunge in the first half of the year, which narrowed substantially to a just 3% fall in the December quarter to 244 tonnes from a year earlier.

Jewellery demand dropped of 22.4% in 2016 to 514 tonnes. In value terms, jewellery demand fell 12.3% in 2016 to R1,38,837.8 crore from a year before, the report said.

Somasundaram said government policies are essentially aimed at delivering a stronger economy and a more transparent gold industry, and both of which should offer significant benefits to gold buyers and accelerate transformation of the industry in becoming more organised.

Also, the impact of demonetisation on rural India could be temporary, as healthy income and good monsoon will support gold demand going forward, he said.

Global demand hits 3-year high in 2016

The global gold demand touched a three-year high of 4,308.7 tonnes in 2016, although the annual growth remains a modest 2%, showed the WGC data.

It said 2016 was the second best year for gold exchange-traded funds, as global demand for gold­backed ETFs and similar products touched 531.9 tonnes — the highest since 2009. However, jewellery demand touched a 7-year low, thanks to a crash in consumption in India and China. “Rising prices for much of the year, regulatory and fiscal hurdles in India and China’s softening economy were key reasons for the weakness,” it added.

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