The consumer demand for gold from India in the July-September quarter fell about 32 per cent from a year ago to 124 tonnes, its lowest level in 13 quarters. Demand was hurt by elevated prices of the yellow metal, dampened consumer sentiment due to the economy slowing, and an increase in import duty in July from 10 per cent to 12.5 per cent.

India was not the only country to experience a decline in demand for gold, global consumer demand shrank 28 per cent in that quarter to 611 tonnes, from a year ago, and China’s demand contracted 25 per cent, the latest quarterly update of the World Gold Council reported.


At that level, consumer demand for gold was at its lowest in any quarter of the current decade, quarterly demand data beginning from 2010 published by the WGC show. More significantly, China has firmly displaced India as the world’s leading consumer of gold.

Here are five significant trends that have emerged in the demand for gold.

1. Overall demand from India has fallen more sharply

The overall consumer demand for gold from China was 61 per cent higher compared to that from India in the July-September quarter, even though China, too, experienced a 25 per cent drop in demand to 199 tonnes. The July-September quarter is usually significant for the gold consumption in India, as that is the quarter that traditionally sees post-harvest buying in rural India as well as marriage season buying in southern India.

Clearly, the distress in the farming sector and muted wedding season buying due to elevated prices of the yellow metal pulled demand down to the level last seen in April-June 2016. Gold prices had soared from ₹34,000 per 10 grams at the end of June 2019 to ₹39,000 by the first week of September.

China’s demand, too, was dented by soaring prices and weaker consumer sentiment — the July-September level of demand was last seen in the second and third quarter of 2016, when the country’s economic growth had slowed to 6.7 per cent on a year on year basis. However, the sequential rise in prices of gold in China was a slower 8.7 per cent compared to 15.6 per cent in India.

2. China’s annual demand has outstripped India’s

The demand for gold from China exceeded that of India for the first time in 2013 when the Indian government tamped down demand with higher duties and various import restrictions amid a worsening current account. The same year demand from China jumped 57 per cent to 1,345 tonnes while demand from India grew a tame 5 per cent to 959 tonnes. Demand has declined in both countries since that year. The full-year demand in 2018 from India was about 760 tonnes and from China was about 994 tonnes, which was a 21 per cent and 26 per cent drop, respectively, from the peak.

Overall demand in the current calendar year in both the countries is anticipated to settle much lower for India at about 700 tonnes, notwithstanding wedding season buying in North India. In the first nine months of the current calendar, consumer demand for gold from India, was at 496 tonnes, while China stood at 639 tonnes. This was about five per cent and 14 per cent lower, respectively, compared to the same period last year.

3. China has fallen in love with gold jewellery

The demand for gold for jewellery from China was over 20 per cent higher than from India for the first nine months of the current calendar. China’s demand for gold for jewellery was estimated at 476 tonnes, compared with 396 tonnes from India. The gap in demand between the two countries was the widest in 2013, with China’s demand being 52 per cent higher at 939 tonnes compared to 628 tonnes from India.

The gap was the narrowest in 2017, at a little over 10 per cent, when India’s demand was an estimated 602 tonnes and China’s was at 665 tonnes. India had experienced a collapse in demand for gold jewellery in the first half of 2016, with demand shrinking about 38 per cent from the same period a year ago. Incidentally, in 2010, China’s demand for gold for jewellery was about 30 per cent lower.

4. India has lost its appetite for bars and coins

Back in 2010, Indians’ demand for gold in the form of bars and coins was about 50 per cent more than China’s. Indian consumers demand was estimated at 340 tonnes compared to 184 tonnes from China. In 2018, it had fallen to about half of that of China, with India’s demand at 162 tonnes compared to 308 tonnes from China. For the nine months of the current calendar year, India’s demand for gold as coins and bars was 38 per cent lower at 100 tonnes compared to 163 tonnes from China. India’s demand for gold bars and coins fell to its lowest January-March 2009. It has also seen that the Chinese had traditionally had a lower ratio of jewellery to bar and coin demand compared to India. For instance, the demand for a tonne of jewellery to a tonne of bars and coin in China hovered around 2.2 to 2.5 while the same for India was 3.5 to 4.


5. China’s official reserve level dwarfs India’s

China’s official holding of gold, with its central bank, the People’s Bank of China, is more than three times the holding of India, kept with the Reserve Bank of India. The WGC report estimates that China held 1,948 tonnes of gold as of September 2019, as the People’s Bank increased its holding of the metal every month, beginning December 2018.

In comparison, India held 618 tonnes, of which 40.5 tonnes was acquired in 2018. China’s gold holding accounts for just about 3 per cent of its reserves, and in contrast, India’s hoard is about 7 per cent of its reserves. China is also the largest holder of American treasury bills. The US Federal Reserve has the largest hoard, estimated at 8,133 tonnes and Germany was in the second position with 3,367 tonnes.