Gold demand dropped 24 per cent in the September quarter to 146 tonnes (193 tonnes) on the back of GST roll-out, increased vigilance under the PMLA (Prevention of Money Laundering Act) and high prices.
The World Gold Council expects gold demand this year to settle close to 674 tonnes logged in 2016. In the last three quarters, gold demand has been up 7.6 per cent at 454 tonnes (422 tonnes).
“The demand for gold this year is expected to be below the five-year average and should settle at the lower range of our expectations of 650-750 tonnes,” said Somasundaram, PR, Managing Director (India), World Gold Council.
Jewellery demand was down 25 per cent at 115 tonnes (153 tonnes), while that of investment dipped 23 per cent to 31 tonnes (40 tonnes).
Despite weak demand, gold shipments into India jumped 62 per cent to 161 tonnes (100 tonnes) as importers ordered 30-35 tonnes from Korea with the removal of 12.5 per cent countervailing duty (in the form of central excise duty) on roll-out of GST. To counter duty-free import of gold from Korea, which had signed a free trading agreement with India, the government had imposed CVD equivalent to the import duty.
However, with the roll-out of 3 per cent GST on gold, all other duties including the CVD got cancelled. Taking advantage of this, importers ordered about 35 tonnes of gold from Korea by paying just 3 per cent GST against import duty of 12.5 per cent. Finally, the government plugged the loophole by excluding the yellow metal from the purview of free trade agreement with Korea.
Somasundaram PR, Managing Director (India), World Gold Council, said gold prices are quoting at a premium of $2 an ounce in the wholesale markets despite large-scale import and weak demand. This is an indication that jewellers expect the demand to pick up in the December quarter as customers and trade get used to GST.
Gold prices were up 8 per cent at ₹26,414 per 10 grams in the September quarter against ₹28,734 per 10 grams logged in the same period last year.
Somasundarm expects the coming year to be a watershed moment for the bullion industry with the government announcing policy for a spot exchange, hallmarking and bring more transparency to the trade.