Gold & Silver

Gold demand dips to 11-year low as Covid-hit consumers turn cautious

Suresh P Iyengar Mumbai | Updated on April 30, 2020

Gold’s status as a safe haven being tested, says Somasundaram PR, Managing Director, India, World Gold Council

Gold demand in the March quarter was down to 11-year low to 102 tonnes due to volatile high prices and economic uncertainties. It slipped 36 per cent  compared to 159 tonnes logged in same period last year. This apart, the logistics freeze towards March-end due to the Covid pandemic also took a heavy toll on demand.

The previous lowest demand was recorded in the March quarter of 2009, when the Lehman crisis in the US unsettled investor confidence and pulled down demand to 41 tonnes in India.

Jewellery demand also plunged to 11-year-low or 41 per cent to 74 tonnes against 125 tonnes logged in same quarter last year, while that of investment slipped 17 per cent to 28 tonnes (34 tonnes).

Gold prices in the March quarter were up 25 per cent at ₹36,784 per 10 g, taking a toll on overall demand. With prices touching a high, imports dropped 56 per cent to 78 tonnes (177 tonnes) while dore (unrefined gold) shipments also dipped 47 per cent to 36 tonnes (67 tonnes). The lifetime high prices pushed gold recycling by 16 per cent to 18 tonnes (16 tonnes), but when compared on a sequential basis, it is down 36 per cent by 28 tonnes logged in December quarter.

Somasundaram PR, Managing Director, India, World Gold Council said with the prices expected to remain volatile on the higher side, the recovery in demand is going to be slow,  as the jewellers have to follow  strict norms on social distancing after reopening their outlets.

The excess liquidity in the system across the world and investment demand of institutional investors will drive gold prices going ahead, he added.

Though jewellery demand for weddings will revive, it will remain under pressure with economic lockdown, salary cuts and job losses due to Covid pandemic, he said.

The industry should not waste a good crisis and use it to gain consumers’ confidence by adopting best practices such as doing away with cash transactions, offering right purity and doing away with tax evasion, said Somasundaram.

A good  start has been made by pushing online sales, but care should be taken to avoid any accidents with lack of government regulations on jewellery sales online, he said.

Published on April 30, 2020

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