For the year’s first half, January-June, the decline was six per cent, to 338.7 tonnes from 363.3 tonnes in the corresponding period last year.
“There was a strong Q2 in 2017 when consumers rushed to make advance purchases ahead of the GST (goods and services tax) roll-out (it took effect July 1). A strong Akshaya Tritiya (considered auspicious for gold purchase) and wedding season boosted demand at the start of the quarter this year but the onset of adhik maas and a rising Indian rupee price in spite of softening international prices kept the quarter range-bound,” said Somasundaram P R, managing director for India at the WGC.
Global gold demand declined from all sectors, barring technology which reported a marginal two per cent jump during the April-June quarter. The fall was as much as 46 per cent in global exchange-traded funds and overall world demand fell four per cent to 964.3 tonnes, compared to 1,007.5 tonnes in the corresponding period last year.
Stronger demand in China and Iran (fuelled by increasing geopolitical tension with America) was offset by falls in Turkey, India and Europe, where local prices remained elevated. Despite the decline in global prices, gold moved in a narrow range in India due to the rupee's slide.
“The short-term disruption caused by the various transparency measures since 2016 have started to wane, with the industry transitioning well across the spectrum. For the second half, good monsoons and the festive season, aided by the government’s effort to boost farm incomes, bodes well for demand. Our full-year estimate for gold demand is in the range of 700-800 tonnes,” said Somasundaram.
The average annual demand in India over the past decade is estimated at 850 tonnes. While demand for the first half of the year is below the same period in 2017 and the 10-year average by six per cent and 13 per cent, respectively, there are strong positives evident in the growth of organised trade and digital products.
WGC estimates a substantial fall of 34 per cent in India’s net bullion import at 162.5 tonnes for the second quarter, from 245.9 tonnes a year before. Dore (unrefined gold) import, though, fell only marginally at two per cent, to 69.2 tonnes for April-June. This indicates that refineries across India performed well, ahead of the ensuing festival and seasonal demand in the months ahead.
Taking advantage of the intermittently high prices during the quarter, consumers sold old jewellery to either exchange for new ones or to cash on the opportunity. Thus, gold recovery sale from old jewellery posted a jump of eight per cent to record the highest quarterly ever at 32 tonnes for April-June.
Future demand would depend upon monsoon rainfall, which seems to have started turning weaker. Also, much would depend upon the US Federal Reserve’s decision on revising of interest rates, scheduled next month, said Somasundaram.