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India’s Gold Demand Expected To Stay Below Average In 2018

World Gold Council estimates up to 800 tonnes demand in 2018, below the five-year average in India.



A salesman shows a gold necklace for a photograph at the Bherumal Shamandas Jewelers store in the Zaveri Bazaar area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
A salesman shows a gold necklace for a photograph at the Bherumal Shamandas Jewelers store in the Zaveri Bazaar area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

India’s gold demand rebounded during the festival season after falling immediately after the now-withdrawn clause in the money laundering law that mandated a disclosure whenever buying yellow metal worth more than Rs 50,000.

Gold jewellery demand rose 4 percent on a yearly basis to 189.6 tonnes in the quarter ended December, the highest in the fourth quarter in 17 years, according to a report by the World Gold Council. That compares with 175.2 tonnes jewellery demand in China, the world’s largest gold market.

The annual gold demand was up 9 percent year-on-year at 726.9 tonnes in 2017. That’s still much lower than the five-year average of 810 tonnes, Somasundaram PR, managing director at the World Gold Council, told BloombergQuint.

Gold demand plunged 25 percent in the quarter ended September after the government added gold to the Prevention of Money Laundering Act. The rebound in the fourth quarter was aided by lower gold prices coinciding with the festive buying for Dhanteras, considered auspicious to buy the yellow metal. As the demonetisation impact wears off, the demand is likely to stabilise at 700-800 tonnes in 2018, the council estimates. That compares with a 10-year average of 840 tonnes.

“We are not surprised that the demand has come back with many compliance-related matters of the trade settling in, particularly Goods and Services Tax,” Somasundaram said. “Withdrawal of Prevention of Money Laundering Act from gold added to the consumer sentiment.”

The average yearly spot price for gold in India dropped 1.2 percent to Rs 28,985 for 10 grams in 2017 compared with the previous year. The price fell below Rs 29,000 for the first time since August, boosting the retail demand in October-December, the report said. That compares with a 5.1 percent rise to $1,257.2 an ounce in the average yearly gold prices in the U.S. A 6 percent appreciation in the rupee against the dollar in 2017 also helped the price soften in India.

India’s Gold Demand Expected To Stay Below  Average In 2018

In 2017, the annual per capita consumer demand in India to its lowest since 2010 at 0.6 grams. Total investment demand also fell 2 percent to 164.2 tonnes as investors focussed more on equities, the report said.

The demand has not gone away and is probably coming back in an organised manner. India may reach its normal range of 800-900 tonnes by 2020, Somasundaram said.