India regains top gold consumer slot

Replaces China as imports more than double to 204 tonnes in September quarter, with demand up 39%

India overtook China in demand for gold in the third quarter of the current calendar year, with a rise of 39 per cent here from the corresponding period a year before.

This was thanks to a steep fall in prices, encouraging retail buying. The ongoing festive season and ensuing wedding trends supported this.

India's inflow in the September quarter went up from 91 tonnes in the same period last year to 204 tonnes in this one, a 220 per cent increase.

Data compiled by the World Gold Council (WGC) showed India's gold demand at 225.1 tonnes in the quarter, against 161.6 tonnes in the corresponding one of 2013.

The demand for jewellery rose 60 per cent to 182.9 tonnes in the quarter, against 114.5 tonnes earlier.

Gold demand in China dived 37 per cent due to a retail buying slump, to 182.7 tonnes for the quarter ended September as compared to 291.2 tonnes in the period last year.

Banks' pullout from sales of gold coins and bars to consumers resulted in a 10 per cent decline in investment demand to 42.2 tonnes in the quarter, from 47.1 tonnes in the period of last year.

  This surge in our gold demand could worry the government, as the total demand in value terms rose 35 per cent to $9.3 billion from $6.9 bn here. In rupee terms, it rose 31 per cent to Rs 56,219 crore in July-September versus Rs 42,830 crore in the corresponding earlier period.

"The increase reflects partly the intrinsic nature of demand and low base of the corresponding previous year's quarter, which was impacted by a range of duty increases and supply restrictions in terms of the 80:20 rule. The third quarter can be viewed as a normal one for demand, in spite of the unfulfilled expectations of duty cut and policy relaxations from the new government," said Somasundaram P R, managing director of WGC (India).

The increase in demand also demonstrates the resilience of India's appetite for gold jewellery.

Improved consumer confidence in both the domestic economy and the new government added to the positive sentiment, with strong levels of purchasing seen in the build up to Diwali.

Global demand for gold, however, fell marginally by two per cent in the quarter, to 929.3 tonnes as compared with 952.8 tonnes last year.

During calendar year 2013, total gold demand in India was estimated at 974 tonnes.

"Going by the current festive buying and given that the December quarter has historically remained good for India's gold demand, we estimate total demand of the yellow metal to remain at 850-950 tonnes in 2014," said Somasundaram.