Gold demand in Q1 falls to five-year low of 102.1 tn

Investment

Price
Rs/10g

2000153.520.34061 2001189.627.83939 2002101.8174523 200383.3165399 200498.116.95930 2005168.932.15999 200699.442.27894 2007140.761.59220 200871.13111838  The last instance when demand for the yellow metal slumped to a record low was in the first quarter of 2003 - 99.3 tonnes - when the price suddenly had perked up to Rs 5399 per 10 grams, a rise of almost 20 per cent from the corresponding quarter of 2002.  Demand for gold in India is led by the jewellery sector. Scrap sales (re-sales of jewellery) becomes relevant when the price touches record high. On the back of record rise in gold prices, this year too scrap sales increased 50 per cent to 40 kg in comparison to 18-20 kg normally.  Last year India had consumed 769.2 tonnes of gold, with the jewellery sector at 551.7 tonnes and retail at 217.5 tonnes.  The WGC data, however, indicates that global gold demand is way below India's level at 23 per cent. Global gold demand in the first quarter of the current year was recorded at 518.1 tonnes compared with 676 tonnes in the corresponding period of the previous year.  India is most affected when gold prices are volatile. In the first quarter of this year, demand from both jewellery and net retail investment was around half the last year's level in tonnage terms.  In the first quarter of 2007, prices were relatively stable as they were below an earlier peak. In rupee terms, the year-on-year fall in demand was just over one third, the WGC release said.  Demand was low in January and February. The first fortnight of the year are generally considered to be an inauspicious period but even after this volatility prevented any recovery in buying. Besides, the rupee's weakening in February impacted gold imports.  Trade and bullion suppliers occasionally stocked up when the prices dipped, but this was limited due to weak consumer demand.  Branded jewellery suffered less as they are sold on a fixed price basis, but even in this segment jewellers were obliged to increase their retail prices to some extent because of the rising cost of gold.  The pace of the decline in gold demand is likely to slow in the second quarter after data from sales during Akshaya Thritiya and wedding-related purchases come in.  Preliminary data suggests that although the festival has generated lower sales than in 2007, mostly due to the 33 per cent price hike, demand in value terms has witnessed growth.