Indian consumers are known to spend a lot on Gold jewellery but this year the demand was low in the first quarter. According to a report by World Gold Council (WGC), the Gold jewellery demand of 78 tonnes in the first quarter of 2023 was the weakest for the first quarter in India since 2020.
The report says that the Gold jewellery demand in Q1 2023 was 17% lower compared with Q1 2022. Also, coming on the heels of an exceptionally strong Q4 2022, the Q1 2023 figure generated a stark 65% q-o-q decline in India.
In contrast, Chinese consumers bought 198 tonnes of gold jewellery in Q1, which was 41% of the global total. This was also the highest first quarter for Chinese jewellery demand since 2015.
Why Indians purchased less Gold jewellery in Q1
“India’s gold demand in Q1 2023 fell 17% y-o-y to 112.5 tonnes following record high and volatile gold prices. This impacted sentiment and gold jewellery demand dropped to 78 tonnes from 94.2 tonnes in Q1 2022 with little support from the investment side,” said Somasundaram PR, Regional CEO, India, World Gold Council.
“Since 2010, barring the pandemic gap, this is the fourth time that Q1 gold jewellery demand fell below 100 tonnes,” he added.
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As per the report, a sharp rise in gold prices, volatility and fewer auspicious occasions in Q1 2023 led to many Indians deferring gold jewellery buying in anticipation of a price fall.
“Sharp rise in gold prices and volatility combined with fewer auspicious days to trigger consumption, has led to many households deferring buying perhaps in anticipation of a downward price correction,” the report said.
Not just Gold jewellery, investment demand in India, primarily gold bars and coins, too saw a drop of 17% to 34.4 tonnes in Q1 2023 from 41.3 tonnes y-o-y. “Global factors, primarily US interest rate hikes, pushing up dollar prices coupled with rupee depreciation kept gold prices above Rs.60,000/10g, nearly 19% jump over last year,” the report said.
The report predicts that Gold demand in 2023 in India would remain muted even as the economic momentum in the country has remained healthy and the RBI rate hike cycle has paused.
Why Chinese purchased more Gold jewellery in Q1
Chinese consumers, however, splurged their wallets on Gold jewellery in Q1 2023 to celebrate finally being unleashed from restrictive zero-COVID measures.
The recovering domestic economy further ignited demand in China as the country’s Q1 GDP increased 4.5% y/y and household income grew 4% in real terms.
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“Pent-up demand from previous quarters also helped (in China). Wedding gold jewellery demand improved amid the relaxation of COVID-related restrictions; the wedding industry has reportedly been operating at full capacity so far in 2023,” the report said.
“And gold jewellery buying was likely spurred by investment motives. The tendency to save among Chinese consumers remains at historically high levels, and gold’s financial value attracted consumer attention. Jewellery (mainly gold) was the second strongest category for y/y sales growth in Q1, as reported by the National Bureau of Statistics.,” it added.