Gold loses its shine in India; demand goes down by 39%
Mumbai (May 12) India’s gold demand fell by 39 per cent in the first quarter of the current calendar year, as buyers deferred their scheduled purchase amid expectation of a decline in prices.
Data compiled by the global mining companies' body, the World Gold Council (WGC), showed India’s overall demand plunged to 116.5 tonnes worth Rs 29,900 crore ($4.4 billion) during the period between January and March, as compared to 191.7 tonnes worth Rs 46,730 crore ($7.5 bn) in the corresponding period a year before.
Both jewellery and investment demands fell.
The former by 41 per cent to 88.4 tonnes as against 150.8 tonnes in the same quarter of 2015 and investment demand by 31 per cent to 28 tonnes from 40.9 tonnes in the same earlier quarter.
For the full year of 2016, feels WGC, the country's demand is likely to be 850-950 tonnes, a decline of 50-150 tonnes from the previous year.
“Demand in India was affected due to the jewellers' strike following the re-introduction of an excise duty, which left even wedding shoppers affected. The sharp increase in the price of gold since the beginning of this year and an expectation of a cut in the Customs duty also led consumers to hold back on purchases,” said Somasundaram P R, the Council's managing director for India.
India's gold import also fell by 39 per cent to 134.4 tonnes in the quarter, from 220.2 tonnes in the same quarter last year, Somasundaram said the new regulation for income tax account details for purchase above Rs 200,000 was also reported to have affected buying. The price of gold rose 17 per cent from the year's beginning and consumers deferred their purchases, assuming the rise was temporary.
There was a sharp price spike in February. Buyers waited and that was followed by the 42-day strike. “Still, the factors driving gold prices are extremely positive. As always, demand remains extremely robust in the second half. The positive monsoon rainfall forecast, lower interest rate in other financial instruments and sharp volatility in equity markets are extremely positive for gold purchasers,” said Somasundaram.
He said the Reserve Bank of India's current gold holding was six per cent (557.7 tonnes) of its foreign currency reserves. “Both the Russian and Chinese central banks have added gold to their foreign currency reserves. RBI should consider adding further gold. Normally, the central bank adds gold to its reserves to reduce dependence on the dollar,” he added. On the Gold Monetisation Scheme, he said banks should be allowed to buy gold, expand the infrastructure and allow coins and bars for monetisation.
Source: TheHindu
