The demand for gold in India fell in the April-June 2023 quarter as compared to the corresponding quarter last year, according to a report by the World Gold Council.
The demand for gold in India for April-June 2023 was at 158.1 tonnes, down by 7 per cent as compared to overall demand of 170.7 tonnes in the year-ago period (April-June 2022), WGC said.
In terms of value, it was, however, higher at Rs. 82,530 crores, up by 4 per cent as compared to Rs 79,270 crore in April-June 2022, WGG said in its report titled The Gold Demand Trends Q2 2023.
The total jewellery demand in India for the quarter (April-June 2023) was also down by 8 per cent at 128.6 tonnes as against 140.3 tonnes in the corresponding period last year. However, in terms of value, it was up by 3 per cent to Rs 67,120 crore, as against Rs. 65,140 crore in Q2 2022 (April-June 2022).
According to the World Gold Council, this was on account of sensitivity to gold prices as a result of inflation and policy changes, which spiked gold prices across the world.
Somasundaram PR, Regional CEO, India, World Gold Council said: “India’s gold demand in Q2 2023 dropped by 7 per cent to 158.1 tonnes in comparison to Q2 previous year demand of 170.7 tonnes. The demand for gold jewellery in India experienced a notable decline of 8 per cent year-on-year (y-o-y) to 128.6 tonnes for Q2 2023. This decline can be attributed to the prevailing record high rupee gold prices, which significantly impacted affordability and consumer sentiment.”
Incidentally, the demand for investment for the quarter also dipped by 3 per cent at 29.5 tonnes as against 30.4 tonnes in the year-ago period. In terms of value though, it was up by 9 per cent at Rs. 15,410 crore as against Rs. 14,140 in Q2 2022.
“There was a brief but notable impact on gold demand following the kneejerk reaction to the ban of Rs. 2,000-rupee notes during the quarter. This highlights the sensitivity of Indian consumers to policy changes, which can have short-term effects on gold demand. While challenges related to high gold prices and inflation persisted, the supportive economic backdrop and consumer adaptability played a significant role in bolstering the market's resilience,” Somasundaram PR said.
However, gold recycling in India witnessed a sharp spike during the quarter, up by 61 per cent to 37.6 tonnes as compared to 23.3 tonnes in Q2 2022. Total gold imports in India in Q2 2023 was 209 tonnes, up by 16 per cent as compared to 180.7 tonnes in Q2 2022, the WGC said.
According to Somasundaram PR, many consumers would have opted to book profits from historic high gold prices, but as things stand, they remain cautious about gold demand as it faces uncertainties due to elevated local prices and slowdown in discretionary spending.
Nevertheless, the success of the monsoon season could bolster sentiment ahead of Diwali season and throw positive surprises, he said.
“With H1 2023 demand at 271 tonnes, our estimate for full year gold demand is in the range of 650-750 tonnes in 2023,” he added.
Central Banks Help Gold Prices
The report further said that gold prices benefited from record central bank buying in the first half of the year and it was supported by healthy investment markets and resilient jewellery demand.
Gold demand, excluding over-the-counter (OTC) market dropped by 2 per cent y-o-y to 921 tonnes during Q2, although total demand, inclusive of OTC was up 7 per cent y-o-y.
Second quarter central bank demand was down to 103 tonnes, primarily driven by net sales in Turkey due to country-specific political and economic circumstances, the report said.
“However, central banks bought a first half record amount of 387t, and quarterly demand is in line with the longer-term positive trend – indicating that official sector buying should remain strong throughout the year,” the report added.
According to the report, globally the demand for bar and coin increased by 6 per cent y-o-y to 277 tonnes in Q2, and a total of 582 tonnes in H1, thanks to growth in key markets including the US and Turkey.
Gold exchange-traded funds (ETFs) outflows were registered at 21 tonnes in Q2, notably smaller than the 47 tonnes in the same quarter of 2022.
Louise Street, Senior Markets Analyst at the World Gold Council, said: ““Record central bank demand has dominated the gold market over the last year and, despite a slower pace in Q2, this trend underscores gold's importance as a safe haven asset amid ongoing geopolitical tensions and challenging economic conditions around the world.”
“Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status. In this scenario, gold would be supported by demand from investors and central banks, helping to offset any weakness in jewellery and technology demand triggered by a squeeze on consumer spending.”
