“The nationwide lockdown and high prices acted in combination to keep India’s gold demand
to a record low at 63.7 tonnes during April-June quarter. Barring of a couple of days, retail jewellery stores remained shut for most of period. Thus, the April-June quarter was a washout for India’s gold demand,” said Somasundaram P R, Managing Director, India, World Gold Council, while releasing Gold Demand Trend report for the quarter.
Demand for jewellery dropped by 74 per cent in an atmosphere of fear and uncertainty, where weddings were either being postponed or turning out to be uncharacteristically quiet and private. Investment demand fared relatively better, as gold’s safe haven attributes and perhaps some price increase anticipation attracted high net worth individuals (HNIs) and investors.
Naturally, the convenience of buying online played a significant part in consumer behaviour during lockdown, as gold exchange traded fund (ETFs) grew after being dormant for many years. Digital gold too saw significant activity though volumes are yet negligible in the overall demand scenario.
“Sales trends during the window of opportunity afforded by relaxation of lockdown in select cities, do point to healthy latent demand that should surface once Covid turbulence is behind us,” said Somasundaram.
Perhaps, for the first time in recent memories, the WGC did not forecast India’s annual gold demand due to possibility of a change in consumer behaviour and return of demand with “V” or “W” shape and so much of uncertainty.
Logistical issues and poor demand hammered down imports by 95 per cent to a mere 11.6 tonnes. Dore import declined to 3.5 tonnes for Q2 of calendar 2020 as against 75.5 tonnes for the same period last year.
Most importantly, Indian consumers bought less gold jewellery during the April-July quarter due to the closure of shops. WGC data showed a negligible 0.6 tonnes of gold ornaments were melted to recover gold during the second quarter of calendar 2020 which took total supply decline by 91 per cent to 26 tonnes in April-June quarter 2020 compared to 287.9 tonnes in the same quarter last year.
Trading currently at Rs 53,140 per 10g, standard gold prices
have risen by 60 per cent since January 2019 and 20 per cent since January 2020; income growth or expectation have not kept pace with this.
“As we are still in the midst of the crisis without clear sight of many variables on consumer behaviour, prices or length of the disruption, we will not be able to quantify the impact on the full year gold demand in India,” said Somasundaram.
Meanwhile, a sense of optimism is developing among traders, that by Dhanteras, covid-related disruptions may matter less as society learns to live with the malady, and with a possible upside following some positive news on Covid treatment. This should spur consumer confidence and jewellery demand. Fast rising gold prices
could act as headwinds though, he added.