India's yearly gold demand in 2020 can be the lowest since 1995: WGC

The calendar year 2020 (CY20) may well turn out to be the worst year for gold demand in India since 1995 if the current trends are extrapolated to full-year forecasts. According to the World Gold Council (WGC), gold demand in India thus far in CY20 stands at 252 tonnes, as compared to 496 tonnes in the same period last year. Even if October – December 2019 (Q4CY19) demand of 194 tonnes is added to the CY20 demand till now, the total demand for CY20 will be lower compared to CY19 total demand of 696 tonnes.

“CY19 was as it is an anemic year for gold demand. That said, there are a number of events lined up over the next quarter (Q2CY20). The economy is opening up and we don’t know how the demand will shape up in the backdrop of wedding season coinciding with job losses and pay cuts. However, gold will find some takers in case the prices dip below Rs 50,000 per 10 gram,” said Somasundaram PR, managing director, India, World Gold Council.

As per WGC data, the calendar year 1995 was the worst with the yearly gold demand in India at 462 tonnes, which improved marginally to 511 tonnes in 1996, 547 tonnes in 2002 and 642 tonnes in 2009.

At 2,972.1 tonnes year-to-date (YTD) demand for gold at the global level is 10 per cent below the corresponding period in 2019, suggests WGC's Gold Demand Trends report released Thursday. Demand at 892.3 tonnes in Q3CY20 dropped 19 per cent YoY and is the lowest quarterly total since Q3-2009 as consumers and investors continued to battle the effects of the Covid-19 pandemic.

As regards India, the demand for gold inQ3CY20 stood at 86.6 tonnes, down 30 per cent as compared to the same period in 2019 at 123.9 tonnes. Gold demand value stood at Rs 39,510 crore during the period under review, down 4 per cent as compared Rs 41,300 crore in Q3-2019, WGC data show.

“A sense of cautious optimism has returned among the trade stemming from the fact that society is gradually learning to live with Covid-19. However, as we are still reeling under the impact of the pandemic and fear of a second wave of infections without clear sight of many variables on consumer behaviour, volatile prices, or length of the disruptions, we will not be able to quantify the impact on the full-year gold demand in India other than to say that demand could be multi-year low,” Somasundaram said.

Jewellery demand hit

Gold demand for jewellery at the global level slipped 29 per cent YoY to 333 tonnes in Q3CY20. During this period, India witnessed a massive fall of 48 per cent year-on-year (YoY) to 52.8 tonnes, as per WGC data.

“YTD jewellery demand totals just 904 tonnes, the weakest in our data series by some margin. This is 30 per cent weaker than the equivalent period of 2009 – the next lowest Q1-Q3 total and the time of the Global Financial Crisis (GFC) – when demand reached 1,291.7 tonnes,” WGC said.

Rising gold prices were another deterrent. Between January and end-September, the US-dollar gold prices jumped 25 per cent. As the local gold price breached Rs 50,000/10 gram mark – a major milestone for India – casual/impulsive purchases were curtailed in favour of need-based buying.

“The prohibitive price level also encouraged a shift to lighter-weight plain gold pieces. That apart, inauspicious periods of Pitru-Paksha and Adhik Maas discouraged Indians buying during September as both periods are considered by Hindus to be inauspicious for gold purchases,” WGC said.