India’s first quarter gold demand falls 18% to 135.5 tons on higher prices: WGC

Total jewelry demand in the country fell 26% to 94.2 tons in the last March quarter

Total jewelry demand in the country fell 26% to 94.2 tons in the last March quarter

According to the World Gold Council (WGC), India’s gold demand fell 18% to 135.5 tons in the first three months of this year, mainly due to a sharp rise in prices.

Demand was 165.8 tons in the first three months of 2021.

In value terms, gold demand fell 12% to ₹61,550 crore in the January-March period. It was ₹69,720 crore in the same period last year, according to the “Gold Demand Trends Q1 2022” report published by the WGC.

WGC Regional CEO, India, Somasundaram PR, told PTI that gold prices started rising in January, rising 8% to £45,434 per 10 grams (excluding taxes) in the first quarter of this year, mainly due to geopolitical tensions.

This compares to around £42,045 for the January-March 2021 period.

According to the report, total jewelry demand in the country fell 26% to 94.2 tons in the last March quarter. In the same period last year it was 126.5 tons.

In terms of value, jewelry demand plunged 20% to ₹42,800 crore in the first quarter of this year. The same was ₹53,200 crore in the same period last year.

“After growing to a record level in the fourth quarter of 2021, India’s gold jewelry demand fell 26% year-on-year to 94 tonnes in the first quarter of this year. Since 2010, excluding pandemic periods, this is only the third time the total volume has been below 100 tons in the first quarter,” Mr Somasundaram said.

Additionally, he said less auspicious days combined with a sharp rise in gold prices mean fewer weddings and a pause in retail demand as households postpone buying gold in anticipation of a price correction.

This year, he said, total demand for gold is expected to be around 800-850 tons.

Total investment demand for gold rose 5% to 41.3 tons in the last March quarter, compared to 39.3 tons in the same period last year.

According to the report, demand for gold investments increased by 13% in value terms to ₹18,750 crore. It stood at 16,520 crore in the same quarter of 2021.

However, investment demand, mainly bullion and coins, rose 5% to 41 tons, with rising prices and volatility in stock markets serving as support, Mr Somasundaram said.

The Reserve Bank of India (RBI) continued to buy the yellow metal, buying 8 tons in the first quarter of this year, he said, adding that the central bank started buying gold in late 2017 and has since bought 200 tons.

In the first quarter of 2022, total gold recycled in the country increased by 88% to 27.8 tons. In the same period of the previous year, this was 14.8 tons.

Total net ingot imports fell 58% to 132.2 tonnes in the most recent March quarter from 313.9 tonnes in the same period last year.

With safe haven demand and the devaluation of the rupee pushing gold prices above £50,000 per 10 grams, Mr Somasundaram said discussions with traders showed most purchases were of lower ticketed items such as 10 grams and under.

“Overall, Indian gold demand is down 18% for the quarter and with recycling up 88%, net bullion imports for the quarter were 58% lower year-on-year. The pause in growth could be the result of mixed market sentiment on price, uncertainty about COVID caused by news in the neighboring market, inflation fears and long-term implications of the global conflict,” he said.

Geopolitical uncertainties, particularly following the Russia-Ukraine conflict, should encourage more investors to buy gold for both diversification and hedging purposes.

“The impact of the revival in rural markets, particularly with a normal monsoon forecast for the fifth straight year, is likely to be significant for gold in 2022,” Mr. Somasundaram said.

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