High prices pull down gold demand

Gold demand in the December quarter plunged 18 per cent to 194 tonnes against 236 tonnes logged in the same period last year as the yellow metal prices zoomed to a new high.

The demand in quarter under review was the second lowest in a December quarter in last 10 years. The previous lowest was 182 tonnes recorded in December, 2011.

On value terms, gold demand was down two per cent to ₹65,890 crore against ₹67,340 crore recorded last year.

Jewellery demand in the quarter under review fell 17 per cent to 149 tonnes (180 tonnes) valued at ₹50,530 crore (₹51,270 crore).

Weak year

In line with the depressing trend, gold demand last year slipped nine per cent to 690 tonnes (760 tonnes) while in value terms it was up three per cent at ₹2.17 lakh crore (₹2.11 lakh crore).

Jewellery demand was down nine per cent at 545 tonnes (598 tonnes) but in value was up three per cent to ₹1.72 lakh crore (₹1.67 lakh crore).

Investment demand during last year dropped 10 per cent to146 tonnes (162 tonnes) and in December quarter it fell by 4 pc to 45 tonnes (56 tonnes).

Somasundaram PR, Managing Director (India), World Gold Council said though the demand has fallen in volume terms, it was up three per cent in value during the whole year. This implies that people have spent more money in gold but got lesser metal as the prices were very high, he said.

Gold prices in rupee terms was up 13 per cent last year at ₹31,542 per 10 grams and hit a high of ₹33,913 in December quarter. With prices hitting a new high, recycling touched 119 tonnes (87 tonnes).Government has attracted demand for 28 tonnes gold in 28 tranches.

Notwithstanding the uncertainty over global economic growth, about $17 trillion global assets are in negative interest rate territory, which augurs well for gold prices in coming days, he said.

Central banks go gold shopping

Globally, gold demand was down one per cent at 4,356 tonnes despite huge mop-up by ETFs and central banks. Gold purchase by central banks last year at 650 tonnes was the second highest in last 50 years.

Almost 15 central banks bought gold for the tenth consecutive year due to uncertainty in global economy. The RBI bought 33 tonnes of gold last year to increase its gold reserves to 633 tonnes. However, in December quarter, central banks added 110 tonnes which was down 34 per cent year-on-year.

As of December-end, gold reserves of central banks at 34,700 tonnes, was up by 5,000 tonnes in last 10 years.

Inflows in gold Exchange Traded Fund pushed its holding to record high of 2,885 tonnes. It was up by 27 tonnes in December quarter, taking the overall holding to 402 tonnes in 2019.

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