 "India regains lead over China in Q3 gold consumption")
India took over China once again in terms of gold demand in the third quarter of the current calendar year. While gold demand in India reported an increase, that in China posted a steep decline in July - September quarter.
Gold demand in India shot up by a staggering 39% in the third quarter of the current calendar year on sudden spurt on consumer buying, thanks to steep fall in prices that encouraged opportunistic buyers. Also, the ongoing festive season and ensuing wedding trend supported consumers' buying fever.
Data compiled by the World Gold Council (WGC) showed India's gold demand at 225.1 tonnes in the quarter between July - September quarter of 2014 as against 161.6 tonnes in the corresponding quarter of the previous year. Interestingly, jewellery demand in China nosedived by 37% at 182.7 tonnes for the quarter ended September '14 as compared to 291.2 tonnes in the corresponding period last year. The decline in China's gold demand can be attributed to falling retail sentiment in China.
Of the total Indian gold, jewellery demand shot up by 60% to 182.9 tonnes in the Q3, '14 as compared to 114.5 tonnes in the same quarter last year.
Banks' pull out from selling gold coins and bars to consumers resulted into 10% decline in investment demand at 42.2 tonnes in Q3, '14 compared with 47.1 tonnes in the same quarter previous year.
A steep surge in Q3 gold demand may be a cause of concern for the government as the total demand in value terms has reported a rise of 35% to $9.3 billion from $6.9 billion. In rupee term also, gold demand shot up by 31% to Rs 56,219.3 crore in Q3, 14 versus Rs 42,829.6 crore in the July - September quarter previous year.
"The increase in Q3 gold demand reflects partly the intrinsic nature of demand and low base of the corresponding previous year's quarter which was impact by the introduction of a range of duty increases and supply restrictions in terms of 80:20 rule. The third quarter can be viewed as a normal one for gold demand in spite of the unfulfilled expectations of duty cut and policy relaxations from the new government," said Somasundaram PR, managing director of WGC (India).
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The increase in gold demand also demonstrates the resilience of India's appetite for gold jewellery. Improved consumer confidence in both the domestic economy and the new government added to the positive sentiment, with strong levels of purchasing being seen in the build up to Diwali.
Global demand of gold, however, reported a marginal 2% decline in the third quarter at 929.3 tonnes as compared with 952.8 tonnes in the same period last year.
During the calendar year 2013, total gold demand in India was estimated at 974 tonnes. Going by the current festive buying and given that the December quarter historically remained good for India's gold demand, we estimate total demand of the yellow metal to remain between 850-950 tonnes in 2014, Somasundaram said.
Looking at the supply side, gold import into India was reported at 204 tonnes in the July - September quarter of this year as compared to 114 tonnes in the same quarter last year.
With an estimated overall demand to fall at the extreme high end of 950 tonnes with factoring in the positive government's policy decisions, India's gold import will decline proportionately.
Gold supply through recycling, marginally increased at 18 tonnes in Q3 '14 compared with 17 tonnes in the same period last year and 16 tonnes in the second quarter of the current year.