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Consumer demand in India for gold has dropped by 25% during the second quarter to 154.5 tonnes from 204.9 tonnes. In Dollar terms it was dropped by 30% to 5.9 billion during the second quarter ended June as compared to $8.5 billion, a year ago. Demand forecast is 900-1,000 tonne in 2015 (calendar year) as compared to 841 tonne in 2014. Fall in China's consumer demand was much lower at just 5%.
The World Gold Council's Gold Demand Trends report for Q2 2015 shows total demand was 915 tonnes globally, a fall of 12% compared to the same period last year, due mainly to a decline in demand from consumers in India and China. However, demand in Europe and the US grew, driven by a mixture of increasingly confident jewellery buyers and strong demand for bars and coins. Looking ahead, there are encouraging signs moving into what are traditionally the busiest quarters for gold buying in India and China.
China hs remained much ahead of India in terms of gold demand with china's demand in June quarter at 230 tones compared to 154.5 tones of India's demand. Till 2012 China was trailing behind India.
According to World Gold Council's report, extreme weather patterns overshadowed second quarter rural demand which had a direct impact on incomes among the rural population (who account for more than half of India's gold demand).
"...coupled with rising rural inflation and the government's decision to trim the prices at which it purchases rice and wheat from farmers, incomes in these areas have been doubly squeezed," it said.
Somasundram PR, MD-India, World Gold Council (India) Pvt Ltd said that rural consumers are cautious in spending and that is why there is drop in rural demand. "The sentiment turned cautious," he said.
On the outlook, Somasundram said second half of the year will grow by 25%. Rural optimism will come back. He said that the council has factored not a good monsoon, but expect an uptake on general economic trend, and from Q3 it will see a real growth. Compared to last year's 891.5 tones import, this year it could be 900-1000 tones according to WGC.
On smuggling he said, last year it was 175 tonne and will be lower this year substantially due to better enforcement, demand not driving towards huge premium and official supplies (enough importers) is also available. Industry officials however believe that the year is expected to end with 125 tones of unofficial imports which was 200 tones in 2013.
Jewellery demand at some high-end, branded chain stores in larger cities saw modest growth. This contrasted with sizable losses suffered by small, independent jewellers in Tier 2, 3 cities and below.
During April - June quarter, jewellery retailer Titan Company declared that it had been one of the toughest quarters for the company as sentiment was so weak: jewellery sales volumes dropped by 10% year-on-year. Their Goldplus range - designed for 'semi-urban and rural' Indian customers - was one of the poorest performing areas, with the value of like-for-like sales down 24% year-on-year.
While wedding related demand was affected, "An interesting trend is the rapid growth of dore as a proportion of imports; this element of gold imports grew five-fold over the year, from 9.2t in Q2 2014 to 55.8t. This may have been driven by refiners actively seeking out supplies of dore to make the most of the difference between duties on dore and bullion imports. In any case, the groundswell of these imports have contributed to the inventory overhang in the market," according to the council.
Looking at Indian jewellery demand on a half-yearly basis, the net impact is a modest decline of just over 7t. With Diwali heralding the onset of the Q4 wedding season in mid-November, the prospects for H2 are supportive - particularly with the local gold price having dropped substantially in recent weeks.
Investment demand in India down to a 6-year low
Despite reasonable levels of interest around Akshaya Tritiya in April, investment demand for gold in India contracted for a third successive quarter, declining by 30% to a fresh six-year low of 36.5t.
