New Delhi, January 15: Gold price volatility, as well as expectations of weaker economic growth, may result in softer consumer demand in near term but structural economic reforms in India will support demand in the long term, stated World Gold Council in its report published on Wednesday.

The report, ‘Outlook 2020: Global economic trends and their impact on gold’, said the Indian Goods and Services Tax (GST) – introduced in 2017 – rose last year across many categories. Gold import duty increased from 10 per cent to 12.5 per cent. Until tax cuts are introduced as a credible incentive to spur economic growth – the infrastructure for which may not be available until 2021 – higher taxes are exacerbating the impact of the record high local gold price on consumption.

And while the introduction of mandatory hallmarking for gold jewellery at the beginning of the year may enhance consumer trust, this potential initial disruption should not be ignored, it added.

Overall the report stated that gold trade sentiment may remain soft through 2020.

Both China and India are implementing economic reforms geared towards strengthening growth and internal consumption.

In India, policy reforms designed to bring transparency and an orderly trade structure to many sectors of the economy are expected to improve confidence, remove inefficiencies and promote growth.

“We expect these factors to be a long-term positive for gold demand although their effects may take time to become apparent,” the report emphasised.

Market surveys indicate that the majority of economists expect positive growth in 2020 for most countries, with a few forecasting contractions in major economies by 2021 or 2022. However, median forecasts also show an expectation of softer global economic growth relative to 2019.

This, combined with gold price volatility at or above current levels, may discourage jewellery consumers and cause technology demand to soften, the report said.