Gold demand up 13% in July-September

Price fall coupled with strong festive demand kept buying sentiment up

Gold demand in India reported 13% increase in the third quarter of the current calendar year on a sharp jump in jewellery demand following the preparations for the ongoing festive season.

Data compiled by the global mining body the World Gold Council (WGC) showed India’s gold demand at 268.1 tonnes during July – September quarter this year as against 238.2 tonnes in the same period last year. Falling gold prices, however, recorded a 5.8% increase in the value of gold demand at Rs 62,939 crore for the third quarter of the current year as against Rs 59,480 crore in the comparable quarter last year.

“There has been a 13% growth in demand for gold in the July – September quarter of 2015. A softening of prices at the beginning of the quarter led to consumers buying in advance for the festive and wedding season ahead. Although, jewellery demand continues to dominate, at 211 tonnes jewellery volume for the quarter almost equalled the previous peak of 213 tonnes in Q3 2008, growth was broad based with both jewellery and investment demand up 15% and 6% respectively, signifying the continuing reliance on gold in household portfolios and trust in its long term prospects,” said Somasundaram PR, Managing Director (India), WGC.

He added, “We expect demand to remain solid in Q4. This is the peak buying season of Dhanteras and Diwali, and gold remains at the centre of gifting traditions during this season. The gold schemes recently announced by the Prime Minister have also increased consumer choices on gold and created a more conducive environment where one can hold gold. These gold schemes will also enable savers to hold their gold savings in the formal financial system, thereby adding to the institutional market and driving the investment needs of the economy. Based on the demand for three quarters of this year, we estimate full year demand to be in the range of 850 to 950 tonnes, but this is still above the 811 tonnes of demand seen in 2014.” 

Jewellery demand during the quarter was up by 15% at 211.1 tonnes as compared to 184.2 tonnes in the Q3 2014. Surprisingly, investment demand also picked up during the July – September quarter albeit by a marginal 6% at 57 tonnes in comparison 54 tonnes in the corresponding quarter previous year. There was a marginal growth in gold recovery through recycling as consumers held bullion. Total gold recycled in India in Q3, 2015 stood at 18.2 tonnes, as compared to 17.5 tonnes in Q3 2014

WGC expects India’s full year gold demand in the range of 850 – 950 tonnes.

Total world gold demand in Q3 2015 stood at 1,121 tonnes (t), an increase of 8% as compared to the same period last year, a Gold Demand Trend issued by the WGC said.

Global investment demand saw a significant increase this quarter, up 27% to 230t. Bar and coin purchases were up by a third on Q3 2014 with Western markets in particular showing a surge. In the US, bar and coin demand reached its highest total in five years, up 207% to 33t.

Europe also saw strong levels of demand in the investment sector as ongoing concerns surrounding the Greek debt crisis and uncertainty in Eastern Europe, the result of a number of factors including  continuing tensions between Russia and Ukraine and saw demand climb by 35% to 61t. In China, investment demand grew by 70% to 52t, as demand was initially stimulated by the gold price weakness in July, which was further fuelled by the mid-August foreign exchange reform. In India, the investment sector saw its first increase since Q3 2014, up 6% year-on-year to 57t.

Overall jewellery demand for Q3 2015 was 632t compared to 594t in Q3 2014, up 6% year-on-year. Consumers in India, China, the US and the Middle East took advantage of lower prices in July and August. This was particularly evident in India, partly as festival purchases were brought forward, resulting in a 15% increase in jewellery demand to 211t over the period.

Central banks remained a significant source of demand, and were net buyers for the 19th consecutive quarter. Purchases by official sector institutions reached 175t, a level almost matching the record highs in Q3 2014, as the net widened to include new reports from countries such as China and the UAE.