Indians are stocking up on gold, jewellery demand soars 41% in Q2CY17: WGC

Traders fear the govt’s decision to levy 3% GST on bullion and jewellery would hurt their profitability. Photo: Reuters
India’s insatiable appetite for gold jewellery was evident once again in the second quarter of calendar year 2017 (Q2CY17). The total demand for gold jewellery surged to 126.7 tonnes, rising 41% as compared to the previous corresponding period, suggests the latest report by the World Gold Council titled ‘Gold Demand Trends Q2 2017’. 

At a global level, the overall demand for gold jewellery in Q2’17 surged 8% year-on-year (y-o-y) to 480.8 tonnes, the report says.

Also Read: GST woes: India's gold imports to fall in H2; smuggling seen rising, says WGC

The strong recovery, WGC believes, had been widely expected after exceptional import figures were reported, hitting an all-time high of 104.6 tonnes in May as the market stockpiled gold ahead of the goods and services tax (GST) rate announcement. 

“Expecting a punitive GST rate, jewellers and consumers alike crammed their purchases into the first two months of the quarter, slowing down once the government confirmed that a 3% rate would be applied,” WGC says.

Also Read: Gold records biggest discount in 7 months, higher prices hurt retail demand

That apart, WGC also attributes the rise in gold jewellery demand to the festival of Akshaya Tritiya – a key gold-buying festival in the Hindu calendar. The timing of the festival this year, it says, falling over a weekend and coinciding with a dip in the gold prices saw sales rise nearly 30% y-o-y.

Given the implementation of GST, WGC expects the demand for gold jewellery to remain muted in the second half of CY17 (H2CY17). 

Even though the 3% GST rate was lower-than-expectation, WGC expects the new tax to cause short-term disruption as manufacturers, retailers, importers and consumers adapt to the new regime. 

"As consumers and importers brought forward their purchases to Q2, demand will likely be subdued for a few weeks. Stock is plentiful across the supply chain and consumers who have recently purchased are unlikely to do so again in the short term," WGC says.

Also Read: Gold import in second half set to slide

As the market digests this gold, and adapts to GST, the market environment should become more settled towards the end of the year. This, WGC says, should be helpful for gold demand – particularly as the key October festival season approaches.

  Q2'16 Q2'17 % change (y-o-y)
Gold demand 1048.7 953.4 -10.0
Jewellery 446.8 480.8 8.0
Technology 80.1 81.3 2.0
Investment 450.3 296.9 -34.0
Total bar and coin 212.9 240.8 13.0
Gold-backed ETFs 237.4 56.0 -76.0
Central banks & other inst. 78.4 94.5 20.0
Source: World Gold Council report; demand in tonnes  

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