Global gold jewellery consumption was 7% lower y-o-y at 474t, partly as a result of high gold prices, according to latest Gold Demand Trends from the World Gold Council (WGC). Much of the weakness came from China COVID-related lockdowns and India. The lack of auspicious gold-buying days and wedding days in January was followed by a sharp rise in the gold price in late February/early March - a combination that proved detrimental to jewellery buying. Having reached a record high in Q4'21, jewellery demand in India fell by 26% y-o-y in Q1 to 94t. The gold price breached the key psychological Rs50,000/10gm at the end of February, before rising to above Rs53,000/10gm in March. In response, consumers postponed gold purchases, hoping for a price correction or at least a stabilisation. Sluggish demand in March resulted in the local market discount widening as far as US$60/oz - its highest for 18 months. The outlook for Q2 demand in India is positive, although further increases in the gold present a downside risk to demand. Demand in the second quarter will receive support from Akshaya Tritiya which is a key gold-buying festival in India and falls in the first week of May. Wedding season buying is also likely to support. Although RBI's Consumer Confidence Index increased to 71.7 in March from 64.4 in January, demand could face headwinds from broad-based inflation that may curb demand by squeezing disposable incomes.
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