India's jewellery demand dips 41% to 11-year low in March quarter: WGC

India’s demand for gold jewellery slumped 41 per cent in the quarter ended March 2020 to 73.9 tonnes – a 11-year low – as coronavirus pandemic triggered a rally in gold prices, said World Gold Council (WGC) in its latest report on gold demand trends released Thursday. The fall is sharper than the 39 per cent drop seen world over, which is estimated at 325.8 tonnes.

On the other hand, demand for gold jewellery in China – the largest consumer of the yellow metal – dropped a massive 65 per cent during the period under review to a 13-year low of 64 tonnes, WGC’s findings suggest. In value terms, the demand drop at the global level translates into a fall of 26 per cent year-on-year (y-o-y) to a 10-year low of $16.6 billion, in spite of a quarterly average gold price of $1,582.8/ounce (oz).

“Global jewellery demand hit the lowest quarterly total in our series, dropping 39 per cent y-o-y to 325.8 tonnes. This is 42 per cent below the five-year quarterly average of 558.1 tonnes. Almost without exception, jewellery markets across the globe recorded y-o-y losses as the impact of the coronavirus compounded the effect of high, and steeply rising, gold prices,” WGC said.

The virus spread also caused disruption to gold supply with mine production dipping 3 per cent year-on-year (y-o-y) to a five-year low of 795.8 tonnes.

 

Demand slump to continue

As regards India, although the wedding season lifted demand early in the March 2020 quarter, a sharp rise in local gold prices from mid-February led to a slowdown in demand as consumers held back on purchases. However, the overall demand slumped once the country went into a lockdown mode on the rampant spread of coronavirus. Jewellery demand in March, according to WGC estimates, slumped between 60 - 80 per cent.

The average price in India of Rs 41,124/10g in the March quarter was 26.6 per cent higher y-o-y. A weaker rupee, WGC said, along with a rising gold price in US dollar terms, resulted in the local gold price closing at an all-time high of Rs 44,315/10g in March.

Going ahead, WGC expects the demand for gold jewellery to continue to slump as the lockdown enters May. This, WGC feels, will impact the demand for gold during the key buying festival of Akshaya Tritiya, as well as wedding-related purchases.

"Although some branded retailers have reported increased interest in their online platforms, logistical issues imposed by lockdown measures have made it difficult to fulfil the orders they generate," WGC said.

Exchange traded funds

Flows into gold-backed exchange traded funds (ETFs), on the other hand, moved higher. Global holdings of physically-backed gold ETFs and similar products jumped by 298 tonnes during the March quarter – the highest quarterly inflows for four years. Bar and coin investment demand, however, was down 6 per cent 241.6 tonnes as compared to the corresponding quarter in 2019.

“In value terms, assets under management (AUM) in gold ETFs increased by a record $23 billion over the quarter on the back of a 10 per cent increase in flows combined with a 6 per cent quarterly increase in the gold price. Holdings reached a new historical high of 3,185 tonnes by the end of the quarter," WGC said.

Gold ETF