India Sees A 12% Drop In Gold Demands At The End Of Q1 2018
As gold demands in China and the United States of America increase, Indian consumers lowered the demand by 12% due to an increase in gold prices and the weakening of Indian rupees. The overall demand for gold worldwide saw a slow start to 2018 reaching 973 tons recorded as the lowest first quarter since the year 2008. The World Gold Council states that the reason for a quiet start was caused mainly due to fall of investment demand for gold bars and gold-backed exchange-traded funds.
Along with India, China, Germany and the US drove weakness in bar and coin investment which also contributed to the 15% decrease in gold demands globally comprising of 254.9t. One of the main reasons China contributed less was due to their strong demand trends in Q1 2018. However, the Central Banks of the world added 116 tons to global official reserves where Russia, Kazakhstan and Turkey dominated the list adding 91t between them.
Alistair Hewitt, Head of Market Intelligence, World Gold Council explained the increase in gold prices and the importance of the commodity for central banks. He said, “Relatively solid global economic growth, coupled with the return of volatility in the capital markets in February, created a stable environment for gold in Q1 – while equity markets around the world came under pressure, the gold price rose. Although demand was down year-on-year, we saw encouraging levels of jewelry 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.”
Demand for gold in Q1 2018 was at 115.6 tonnes which is 12% less as compared to the overall Q1 demand in 2017 (131.2t) for India. The value of gold demand also faced a fall of 8% from Rs. 34,440 crores in Q1 2017 to Rs. 31,800 crores in Q 2018. Including jewelry demand, the value of jewelry demand and gold investment demands saw a downfall compared to Q1 of 2017. In terms of value, gold investment demand in Q1 2018 was Rs. 7,660 crores.
“Local gold price rises led to the second weakest quarter for jewelry demand in almost 10 years. After the strongest Q4 on record in 2017, Indian jewelry demand saw a sharp downturn in Q1 2018, falling 12% year on year to 87.7t. A substantial drop in the number of auspicious wedding days during the period compared with Q1 2017 could be a factor for muted demand as consumers made less wedding-related purchases. Imports were also down 50% year-on-year, in anticipation of an import duty cut in the Union Budget that did not materialize,” explains Somasundaram PR, MD, India, World Gold Council at a briefing held on the 3rd of May, 2018 regarding the drop in gold demands in the country.
He, further stated that there will be positive sentiment once the Union Budget sets gold as an asset class would boost the momentum of the industry to become more organized and transparent. Policy focus on doubling farm income and ease of business under GST would benefit the gold industry in 2018. He also states that now there are new ways of purchasing gold through digital platforms and this will not just promote ease of savings but also enhance acceptability of centrally vaulted gold including the Gold Monetization Scheme.
The reports presented by the World Gold Council were sourced from the Gold Demand Trends Q1 2018 comprising of data provided by Metal Focus.
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