India's gold demand fell 32% in Sep quarter on weak sentiment, high prices

WGC cuts full-year forecast for 2019 to 700 tonnes from 750-800 tonnes estimated projected earlier

India’s gold demand for the July-September 2019 quarter (third quarter, or Q3) declined 32 per cent to 123.9 tonnes, thanks to a weak consumer sentiment and high prices. This was not only the weakest quarterly gold demand since the June quarter of 2016, but also one of the weakest third quarters since 2005. Worse, a large part of the jewellery demand during the quarter was met by sale of old jewellery. The demand for investment in gold also fell during Q3 — by 35 per cent year-on-year to 22.3 tonnes.

The World Gold Council Gold Demand Trend report, released on Tuesday, said: “Indian consumers preferred gold-to-gold exchanges, which accounted for an average 50-60 per cent of purchases, while retailers wound down existing stocks.” Old gold sold without exchange was also 59 per cent higher in the quarter to 36.5 tonnes. India’s gold supply from domestic sources, at 120 tonnes, might set a new record on an annualised basis; the previous record was 118 tonnes in 2012.

For full 2019 calendar year, the WGC downgraded its India gold demand forecast to around 700 tonnes, compared with 760 tonnes last year.

Interestingly, in the first nine months of the year (January-September), India’s reported cumulative gold demand was down only marginally— by 5.3 per cent to 493 tonnes, compared with 523.9 tonnes during the same period last year.

Besides India, China also saw a decline in gold demand — of 25 per cent to 199.1 tones. The overall gold demand was supported mostly by institutional investors who buy exchange-traded product.

“Gold demand in India declined by 32 per cent in the third quarter of the current calendar year, primarily due to a weak consumer sentiment and high prices. Despite a step-up in buying during Akshaya Tritiya in the second quarter, the absence of any major festivals, monsoon and intervening inauspicious period like pitru-paksha led to the muted gold demand in India during the July-September quarter,” said Somasundaram PR, WGC’s managing director for India, while releasing the council’s Q3 Gold demand trend report today.

The WGC attributed the sharp decline in India’s gold demand to a generally low consumer confidence amid talks of an economic slowdown and lack of a secular trend in price movements.

India’s cumulative gold import declined by a massive 66 per cent to 80.5 tonnes during July-September 2019, against 236.8 tonnes in the same period last year. Import of unrefined or dore gold was down 90 per cent to just 6.7 tonnes. WGC attributed lower imports to an estimated 220 tonnes of imported gold lying in the system with nominated agencies, bullion dealers or jewellers.

Most Indian refineries have shut shop due to negative margins on processing of dore. There were many occasions when the gold price was trading at a massive discount of $15 per 10g.