Gold demand up 39% in Q2; imports more than double

Even as gold demand in India in the September quarter increased 39 per cent to 225 tonnes (162 tonnes) on the back of strong buying from the jewellery sector, global gold demand fell 2 per cent to its lowest in about five years.

According to the World Gold Council’s Q3 demand trend, Chinese gold buying slid 37 per cent to 14 tonnes in the third quarter, with global gold demand pegged at 929 tonnes.

In terms of value, demand in India was up 31 per cent at ₹56,219 crore (₹42,830 crore) during the quarter.

During the September quarter last year, the Indian Government had imposed various curbs and increased import duty progressively to 10 per cent to curtail gold imports, and bridge the widening current account deficit.

Somasundaram PR, Managing Director of World Gold Council, said the rise in demand reflects the intrinsic value of the metal. The unusually low base in the same period last year was impacted by a range of restrictions and duty hikes, he added.

Demand in the first nine months of this year was down 18 per cent to 619 tonnes, while in value terms it was down 23 per cent to ₹1.55 lakh crore. With the recent fall in prices, the Council expects the revival in jewellery sales to continue in the December quarter. The demand is expected to range between 850-950 tonnes this year, with more bias towards the lower end. Average gold prices have fallen six per cent to ₹24,970 per 10 gram in the September quarter. Imports more than doubled to 204 tonnes against 91 tonnes recorded in the same period last year.

With regards to the Government’s decision to tweak the 80:20 scheme on imports to make gold available for smaller players, Somasundaram said the Government would do well to increase domestic supply by encouraging domestic recycling rather than resorting to the quota system that may lead to confusion.

With the cost of gold mining rising substantially and global recycling dropping drastically, he said the fall in prices may be limited. In India, recycling dipped 66 per cent to 18 tonnes (53 tonnes) as prices fell sharply.

On the issue of round tripping to work around the 80:20 restriction, he said the sharp rise in exports reported in India was not substantiated by a similar increase in demand by importing countries such as Dubai and South East Asian countries.