The Hindu Business Line : Sharp slowdown in Q3 demand for gold

Mumbai, Nov. 15 Gold demand in India during the third quarter (July-September 2007) witnessed a sharp slowdown, a drastic change from the rapid increases during the first half of the current year.

Growth in demand for the yellow metal decelerated sharply to a mere 5 per cent for the third quarter from 59 per cent in the first half year-on-year, according to report released by the World Gold Council.

While demand for the precious metal during the first half rose to 540.6 tonnes from 315.6 tonnes year-on-year, during the third quarter it merely rose to 185.1 tonnes from 176.2 tonnes quarter-on-quarter, numbers taken from GMFS data indicated.

Price factor

As prices took to their northward journey in September, the strong demand in the first two months faded abruptly in the third quarter, the report said. Gold prices reported an increase of 7.26 per cent during September. This came on top of nearly four per cent in the first two months (July-August) of the third quarter.

With the rupee performing well against the US dollar, gold prices in India remained under the psychological Rs 9,000 per 10 grams. In fact, for much of the time, they were much closer to Rs 8,000/10 g. But the precious metal crossed the psychological price mark on September 5 when it touched Rs 9,040/10 g.

Jewellery market

Demand for gold in India comprises requirement by the jewellery industry and a retail segment investing in gold. In the third quarter the jewellery demand was 134.8 tonnes — a rise of 5 per cent while net retail investment at 50.3 tonnes showed an increase of 4 per cent year-on-year.

Retail investment

The report pointed out that retail investment reported at 50.3 tonnes was an all-time record for the third quarter while jewellery demand at 134.8 tonnes was the highest since 2000.

It further said that with a general belief that prices were more likely to rise than to fall, traders interestingly reported 15-20 per cent higher demand even during the inauspicious period of ‘Aadi’ (July 15 to August 15) than in the corresponding period of 2006.

Demand was also boosted by the strong economy and by the wealth impact of stock market gains.

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