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Gold demand in India was down 28 per cent at 195 tonnes (271 tonnes) in the third quarter on the back of high prices and Government policies targeted at diverting physical gold demand into financial products linked to gold.
The Central government recently levied excise duty of 1 per cent on gold jewellery, besides making PAN card disclosures mandatory for purchase of gold above ₹2 lakh.
The voluntary income disclosure scheme also instilled a fear factor on consumers and had a negative impact on overall demand, said Somasundaram PR, MD (India), World Gold Council.
Though the government policies will bring in some much-needed transparency in the gold trade, its impact on gold demand is short-term, he added.
The WGC has revised downwards its gold demand estimate for this year to 650-700 tonnes from 750-800 tonnes, given the weak demand of 441 tonnes in the last three quarters this year against 621 tonnes logged in the same period last year.
Jewellery demand was down 28 per cent at 155 tonnes and in value terms it was down 12 per cent at ₹44,450 crore.
On average, the gold price in the September quarter was up 22 per cent at ₹28,734 per 10 grams, pulling down demand.
Gold bond plans On the Gold Bond Scheme’s impact on demand, Somasundaram said it is too early for it to affect physical gold demand as the scheme is largely an urban phenomenon and driven by people investing in stock markets.
Moreover, he said, the government has already set a target on these bond issues and may not go overboard on them as these bonds are not backed by physical gold.
US voting On the US election result’s impact on gold prices, Somasundaram said there are other more pressing developments such as the US Fed rate hike, economic growth in the European Union and political issues in France and Germany that could have an impact on gold prices.
However, he said the US election results will only have a temporary impact on prices.
On the Goods and Services Tax, Somasundaram said the rate should be about 5-6 per cent, including import duty, so that the industry and consumer adopt it in fullness. A high rate of taxes would only encourage unofficial sourcing of gold, he said.
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