Indian Gold jewellery demand staged a modest recovery from its Q2 record low but remained well below 2019 levels, according to World Gold Council (WGC). Demand was 48% lower y-o-y at just 52.8 tonnes (t) - the third lowest quarter for Indian jewellery demand in WGC data series. Not only did Indian consumers have to cope with recurring lockdowns and unprecedented gold prices, but also the inauspicious periods of Pitru-Paksha and Adhik Maas discouraged buying during September.
As the local gold price breached Rs 50,000 per 10gm - a major milestone for India - casual/impulsive purchases were curtailed in favour of needs-based buying. The prohibitive price level also encouraged a shift to lighter-weight plain gold pieces.
Despite the positive monsoon season, consumer confidence remains heavily impacted by the economic impact of the measures imposed to contain the pandemic. India's GDP contracted by a whopping 23.9% in Q2 2020 and is expected to contract by 12.7% in Q3. WGC says that the weak picture for jewellery demand has not translated into a surge of selling by Indian consumers. Instead, there has been an increasing focus on the use of gold as collateral for loans.
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