Gold demand, imports jump in Q4

2012 sees imports falling only 11%, despite duty increases; WGC says this reaffirms gold’s role in Indian society

India imported 860 tonnes of gold in 2012, down 11.3 per cent from the 969 tonnes of 2011. The total import is seen as higher than expected earlier, with it surging to 255 tonnes in the October-December quarter of 2012, highest in the last six quarters. It was just 157 tonnes in January-February 2012, prior to the rise in import duties.

The World Gold Council (WGC) has released its gold demand trend report for the fourth quarter of 2012. It said today that

 

India’s imports after the latest rise in import duty, in end-January, would stagnate till the market digests the increase. With such a high import figure, India’s import bill for gold has crossed $40 billion in calendar 2012.

The demand for gold in the fourth quarter (Q4) was 41 per cent higher at 261.9 tonnes compared to 185.5 tonnes in the same quarter of 2011. In Q4 last year, China’s demand crossed India’s but this might have been an aberration; in the quarter just gone by, China’s demand was stagnant.

WGC attributed the fall in imports in 2012 to the government’s frequent intervention to curb the burgeoning current account deficit. Despite a doubling in gold availability from domestic sources through recycling to 117 tonnes in 2012, compared with 59 tonnes in the previous year, overall supply in the country remained lower at 987 tonnes versus 1,039 tonnes in 2011.

Driven largely by a staggering growth in demand for bars and coins, total gold demand in India recorded a phenomenal growth of 41 per cent in fourth quarter of calendar year 2012. As against 262 tonnes of consumer gold demand in the October-December quarter, it was 185.5 tonnes in the corresponding quarter of the previous year.

Global gold demand in the quarter was 1,195.9 tonnes, up four per cent compared to the same quarter in 2011.

  Combined growth in jewellery and central bank demand exceeded declines in the investment and technology sectors to generate the increase in overall demand. In value terms, it was the highest fourth quarter total ever, worth a near-record $66.2 bn.

For the full year, however, global gold demand was an all-time high at $236.4 bn. The annual volume of demand totalled 4,405.5 tonnes, down four per cent from 2011, as an increase in demand from institutional investors and central banks only partly offset a year-on-year decline in consumer demand.

“China and India remain the world’s gold power houses and by some distance, despite challenging domestic economic conditions. In India, consumer sentiment towards gold remained strong despite measures aimed at curbing demand, reaffirming gold’s role in Indian society. In an underdeveloped financial system in India, gold has an important role to play,” said Marcus Grubb, managing director, investment, at the WGC.

Notwithstanding the predicted economic slowing in China, investment demand was up 24 per cent in the fourth quarter and jewellery consumption held steady at 137 tonnes.

The shift of central banks from being net sellers of gold to net buyers in recent years has continued. Official sector purchases across the world are now at their highest level for almost half a century, the Council said.

Despite the turbulent macroeconomic climate through the year, as well as the regional uncertainties affecting India and China, the two largest gold markets, annual demand was 30 per cent higher than the average for the past decade.