Gold demand in India increased nine per cent last year to 727 tonnes. However, it was much lesser than the average five-year demand of 810 tonnes, according to the Gold Demand Trend report released by the World Gold Council on Tuesday.
The Council expects demand to range between 700-800 tonnes this year, well below the 10-year average of 840 tonnes, due to a high import duty of 10 per cent and uncertainty over the impact of three per cent GST on gold jewellery.
Somasundaram PR, Managing Director, World Gold Council, said the gold demand in the December quarter was up two per cent at 249 tonnes, the highest in the last two years due to lower prices during Dhanteras and a positive economic scenario boosting consumer demand.
The exemption of gold from PMLA (Prevention of Money Laundering Act) in the second half of 2017 also revived consumer purchases, he added. The Budget has expressed its intention to frame a gold policy treating it as an asset class which will in a way address concerns on returns, ensure liquidity, bring in transparency in trade and well accepted gold standards. So far, gold has been treated as a commodity leading to various issues, he said.
The revised gold monetisation scheme and launch of a gold exchange will make it easier for consumers to deal with gold as an asset class, said Somasundaram. While average gold prices in India decreased one per cent to Rs 28,985 per 10 gram, it was up five per cent in dollar terms to $1,257 an ounce (about 28 gm) as the rupee appreciated six per cent against the dollar in 2017.
Dore (raw gold) imports increased 73 per cent last year to 246 tonnes, the highest in two years. Dore imports constituted 27 per cent of the net bullion import of 888 tonnes into the country. The government should encourage dore imports as it encourages value addition within the country, but they lay down well accepted bullion standard and refineries, he said.
Allying fear of cryptocurrency eating into gold demand, Somasundaram said blockchain technology can be used in popularising and ease of transactions under gold monetisation scheme. The government should also formalise a dore import policy to encourage responsible sourcing as India is not a signatory to the OECD (Organisation of Economic Co-operation and Development), which has laid down norms for responsible gold sourcing, he said.