Gold & Silver

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

Suresh P Iyengar Mumbai | Updated on April 30, 2020

Jewellery demand also plunged to an 11-year-low.

Gold demand in the March quarter was down to an 11-year low of 102 tonnes due to volatile prices and economic uncertainties. It slipped 36 per cent against the 159 tonnes logged in the same period last year. This apart, the logistics freeze towards March-end due to the 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 an 11-year-low of 74 tonnes, 41 per cent lower than the 125 tonnes logged in the 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 was down 36 per cent against the 28 tonnes logged in the 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 an economic slowdown, salary cuts and job losses due to the pandemic, he said.

The industry should ‘use’ the crisis to gain consumers’ confidence by adopting best practices such as doing away with cash transactions, offering the 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 added.

Published on April 30, 2020

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