Indian gold demand was down from a strong Q2 2017, falling 8% to 147.9 tonnes (t) in Q2 2018 due to high local prices and seasonal factors, but was in line with the long-term average, according to a latest update from the World Gold Council (WGC). The y-o-y drop in demand was magnified by the jump in demand seen in Q2 last year when consumers rushed to make gold purchases before GST was implemented on 1 July. In a longer-term context, Indian jewellery demand was relatively healthy, just 1% below the five-year quarterly average of 149.1t and 3% higher than average Q2 demand over the preceding ten years (144.1t).
Demand was boosted in April by Akshaya Tritiya and the wedding season, before fizzling out. India's gold trade reported brisk demand during the festival, despite relatively high local gold prices at that time. And wedding-related purchases supported demand early in the quarter. This positive effect soon wore off however, as the rupee continued to weaken against the US$, keeping the domestic gold price elevated.
The imminent monsoon kept demand subdued towards the end of the quarter. Although the inauspicious Adhik Maas period ended on 13 June, it was rapidly followed by the onset of monsoon preparations among rural communities, aided by government attempts to boost farm incomes (such as loan waivers and raising Minimum Support Prices on certain crops). Farming communities were heavily involved in sowing crops ready for the monsoon - often a time during which gold is used as collateral for loans to buy seed rather than to purchase gold jewellery.
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