India’s gold demand in value terms in the June quarter fell by 8.7% to ₹35,500 crore on account of rising prices, government regulations, and jewellers’ strike, according to the World Gold Council’s latest report. Further, jewellery demand was down by 10.8% at ₹26,520 crore compared to the previous year period. Total investment demand also declined by 2.1% to ₹8,980 crore of 2015.
Consumer demand fell 18% in the country to 131 tonnes in 2016, as it was a truncated period for sales as jewellers strike extended into April and remained more or less effective until Akshaya Tritiya (considered auspicious occasion for buying gold).
However, elevated price levels and a regulatory push for transparency through PAN cards, tax collection at source and excise duty on jewellery, coupled with weaker rural incomes and kept the demand subdued.
Total jewellery demand in India for the period was down by 20% to 97.9 tonnes, compared to 122.1 tonnes in the same quarter of 2015. Similarly, the value of jewellery demand was at Rs 26,520 crore, a fall of 10.8% from Rs 29,720 crore in the second quarter of 2015. Total investment demand for the June quarter was down by 12% to 33.1 tonnes from 37.7 tonnes in same period last year. In value terms, gold investment demand was Rs 8,980 crore, a drop of 2.1% from Rs 9,170 crore in 2015. During the quarter under review, total gold recycled also declined to 23.8 tonnes from 24.0 tonnes a year ago.
The second quarter also witnessed a spurt in the flow of unofficial gold into the country, significantly impacting the organised and tax compliant segments of the gold industry.
There was a great pick up in grey market and, according to reports, around 40-45 tonnes gold flow was through unofficial channel. However, this is a temporary phenomenon and as soon as the market moves in the right direction this will go down significantly.
He further said that imports declined by 38% in the first half of the year to 291 tonnes as compared to 470 tonnes in the same period a year ago. We expect imports to pick up in the last four months of this year, specially towards end of September to stock up for catering to the festival as well marriage demand.
In the remaining six months of 2016, the gold demand is expected to return to normal during the peak season of weddings and festivals closer to Diwali, supported by good monsoon that will positively impact rural demand. It will benefit both consumers and the trade to transition swiftly to the new reality of better tax compliance, across all the segments in the market
Looking at the trend, gold demand in India for 2016 has been revised to 50250 tonnes. Even as the trend looks positive, we don’t expect that the second half can make up for lost demand. So we have pegged the total demand for 2016 at 750-850 tonnes.