Cooler price pushes India gold demand 5% in Q1, more glitter likely ahead

May rise further on account of Akshaya Tritiya, wedding season

Gold demand in India jumped by 5 per cent in the January-March 2019 quarter due to a fall in gold prices towards the end after demand headwinds in the initial days of the quarter.

The periodical “Gold Demand Trend” (GDT), released by the World Gold Council (WGC), reported India’s gold demand at 159 tonnes for the first quarter of the calendar year 2019 compared to 151.5 tonnes posted in the corresponding period last year.

“The strengthening of the rupee and the fall in the local gold prices towards the later part of the quarter triggered a rise in India’s gold demand by 5 per cent in Q1 2019 (calendar) to 159 tonnes. The stronger rupee also benefited investors, with demand for gold bars and coins rising by 4 per cent in the first quarter. Looking ahead, gold demand in India is likely to be boosted in the April-June quarter due to traditional wedding season buying, the Akshaya Tritiya festival, and rising crop prices. Additionally, the forecast of normal monsoon rainfall this year augurs well for the rural economy and gold. We estimate India’s gold demand to be positive in 2019 and likely to be in the range of 750-850 tonnes in calendar 2019,” said Somasundaram P R, managing director, World Gold Council (India). 

In 2018 gold demand was 762 tonnes, which was stagnant compared to a year ago demand.

Jewellery demand in the January-March 2019 quarter also jumped by 5 per cent in tonnage terms to 125.4 tonnes as against 119.2 tonnes in the same period last year. 

Investment demand for gold during January-March 2019 recorded a mere 4 per cent increase to 33.6 tonnes compared to 32.3 tonnes in the corresponding period last year.

In terms of supply, India continued to bank upon bullion imports, which recorded 11 per cent growth to 175 tonnes between January and March 2019. Dore (un-refined gold) import moved up significantly by 13 per cent to 67.4 tonnes for the quarter ended March 2019 versus 59.7 tonnes in the same period last year.

Somasundaram further said smuggling gold remained subdued owing to intensified surveillance followed by the seizure during the ongoing election period. “Once the elections are over and surveillance withdrawn, smuggling will resume. There is a cost benefit to smuggling. Until that benefit is reduced, smuggling will continue. But, overall trade is shifting in favour of the organised sector,” said Somasundaram.

Overall demand for gold at the global level surged 7 per cent to 1,053.3 tonnes, led by buying by central banks and exchange-traded funds (ETFs), said the report.

Central banks bought 145.5 tonnes of gold, the largest Q1 increase in global reserves since 2013. “Diversification and a desire for safe, liquid assets were the main drivers of buying here. On a rolling four-quarter basis, gold buying reached a record high for our data series of 715.7 tonnes,” the WGC report said.

The first half of the quarter, according to the WGC, was subdued. 

The month-long inauspicious period of Kharmas/Malmas ended in mid-January and was followed by a sharp rise in the local gold price, hitting Rs 33,730 per 10 gm by the third week of February. Prices then slipped to Rs 32,000 per 10 mg by the first week of March. This price correction, the WGC believes, got consumers rushing to make wedding-related buying.

Investment demand

Demand for gold bars and coins surged 3 per cent at the global level, rising to 298.1 tonnes in the recently concluded quarter as compared to 288.4 tonnes in Q1CY18. This again was led by demand in India, which surged 4 per cent to 33.6 tonnes in Q1CY19, as compared to 32.3 tonnes in the previous corresponding period. 

Demand in China, however, dipped 8 per cent to 71.2 tonnes. Investors globally added 40.3 tonnes to gold-backed ETF holdings in Q1, as compared to 27.1 tonnes in Q1CY18 — an increase of 49 per cent y-o-y.

The volume of gold used in technology dipped to a two-year low of 79.3 tonnes, hit by slower economic growth. The supply of gold in Q1, on the other hand, stood at 1,150 tonnes, a modest fall of 3 tonnes on y-o-y basis.