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Reeling under high prices ahead of festival season, gold demand in the September quarter dipped sharply by 32 per cent to 123 tonnes (183 tonnes), the lowest third quarter demand since 2005.
The overall demand in this year is expected to fall close to 700 tonnes, as in last three quarters it hovered at about 496 tonnes, five per cent below 524 tonnes logged in the same period last year.
Jewellery demand in the September quarter was down 30 per cent at 102 tonnes (148 tonnes) while investments in gold plunged 35 per cent to 22 tonnes (34 tonnes).
In value terms, the jewellery demand slipped 17 per cent to Rs 33,851 crore ($4.8 billion) against Rs 40,686 crore ($5.8 billion) logged last year in the same period.
Somasundaram PR, Managing Director, World Gold Council said it is really intriguing that the gold demand has fallen so sharply even while sale of other luxury items such as premium cars and mobile phones have gone up substantially despite talks of economic slowdown.
Calling it as a crunch on middle-class, Somasundaram said the low general consumer confidence and sharp spike in gold prices had taken a heavy toll on gold demand.
Gold prices failed to lose momentum during the quarter breaching the Rs 35,000 per 10 gram logged mid-July to Rs 38,795 by the end of September quarter.
The weak demand and high prices have led to many refineries shut down operations leading to lower imports of dore (raw form of gold). It fell by 90 per cent to 8.7 tonnes (90 tonnes) while gold imports in September quarter halved to 133 tonnes (268 tonnes).
Gold recycling was up 59 per cent to 36.5 tonnes due to high prices. Overall gold recycling is set to touch a new high this year as in last three quarters, the country had recycled 90.5 tonnes of gold, crossing the entire last year's recycling level of 87 tonnes.
Interestingly, despite weak demand in India and China the global gold demand was up three per cent in September quarter to 1,107 tonnes on record inflow into gold exchange traded fund (ETF). This was largely due to inflows from the US and Europe.
Holdings in gold-backed ETF hit an all-time high of 2,855 tonnes with an inflow of 258 tonnes, highest quarterly inflow since Q1 2016.
Somasundaram said the inflow into global gold ETF will remain high as there is a strong fear of the US economy slipping into a recession ahead of the US Presidential election slated in second half of next year.
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