Gold demand drops 12% in Jan-Mar

Chennai: In a clear indication of subdued sentiment and a price-sensitive consumer, demand for gold in the country over the January-March quarter of 2018 was at 116 tonnes — down nearly 12% as compared to 131 tonnes for the same period in 2017, data from the World Gold Council showed. A rise in local gold prices led to the second weakest quarter for jewellery demand in almost 10 years, the report said.

Jewellers and industry observers said that the demand is at a five-year low and is below even the previous low in 2016 (nearly 117 tonnes) when jewellers went on a month-long strike against the hike in excise duty. They attribute a 4.5% increase in prices and consumer sensitivity to price variations as a cause for the drop in demand.

Orra CEO Vijay Jain said, “There has been a steady decrease in the investment sentiment for gold coins and the increase in prices led to a drop in demand for this quarter. Besides, we also see light-weight jewellery gaining prominence even during weddings, thereby reducing overall demand volumes.”

Jewellers, however, said that the January-March quarter has traditionally remained muted because of heightened demand in Q4. A city-based jeweller said, “Some of the smaller players have not completely transitioned to GST and, hence, report lower activity. Akshaya Tritiya was also muted with customers going in for low-ticket purchases.”

World Gold Council MD (India) P R Somasundaram said, “After the strongest Q4 on record in 2017, Indian jewellery demand saw a sharp downturn in Q1 2018, falling 12% to 88 tonnes. A substantial drop in the number of auspicious wedding days during the period compared with Q1 of 2017 could be a factor for muted demand as consumers made less wedding-related purchases.” The council projects the annual demand at 700-800 tonnes. “Imports were also down 50% year-on-year in anticipation of an import duty cut in the Union Budget that did not materialise.”

Somasundaram, however, remains bullish about the forthcoming quarters, “Demand would go up with better monsoon and heightened rural business.”