Consumer demand in India was 8 per cent lower in Q3 at 116 tonnes against the corresponding period last year although gold price have been rising for the last couple of months and hit several successive peaks.
This was a considerably smaller fall than that experienced in the first half of the year, when it fell 44 per cent. The figures do not take into account the rush to sell gold in some parts of the country.
Global demand for gold in the third quarter of 2002 continued to run below year-earlier levels in tonnage terms. However, the rate of decline at 7 per cent was noticeably less sharp than the 14 per cent fall recorded for the first half of the year according to World Gold Council (WGC).
Further, in dollar terms demand was 6 per cent higher than in the corresponding third quarter of 2001 and the decline in the dollar value of demand appears to have been halted.
In part this sharply reduced rate of decline was owing to the fact that demand in the second half of 2001 was relatively weak whereas that in the first half of 2001 was strong according to the World Gold Council.
However, the fact that the rupee price also permitted demand to recover somewhat. The rupee had risen sharply in the first half-year but eased from the middle of June even though it remained volatile.
Trade and consumers both appeared to have adjusted to a price in excess of $300 per oz (or in the 15,000-15,500 rupee per oz range); in August and September official imports were 15 per cent and 33 per cent respectively higher than a year earlier.
Demand trends in both jewellery and industrial use improved compared to the first half of 2002. While high, and sometimes volatile, price remained a deterrent to jewellery purchases, the price gain in Q3 compared to Q2 was small (under 1 per cent) and consumers appeared to be adapting to prices in excess of $300 per ounce globally.
The weak world economy also continued to discourage purchases but the year-on-year decline in jewellery demand tonnage was limited to 4 per cent, a sharp improvement from the 17 per cent fall of the first half year. In dollar terms, demand rose by 10 per cent.
In India, on the other hand consumers remained cautious. Purchases funded by exchange remained high as did trading in of gold for cash. Heavy promotion of diamonds and platinum restrained demand for higher-priced gold jewellery.
Despite this the year-on-year fall in jewellery demand was considerably less than the fall in retail investment, with net investment levels dampened by profit taking due to the higher price.
Notwithstanding the poor monsoon, all reports indicate that gold imports in October, when the price again eased slightly, were very strong as the Diwali festival of November 4 approached. Buying remained vibrant at the time of the festival.
