Gold continues to shine in India, loses sheen in world

India's jewellery consumption up 2.5%; world gold demand falls to 6-yr low in Q2: Survey

World gold demand hit a six-year low in the April-June quarter of the current calendar year on weak demand from China.

A survey conducted by global research firm Thomson Reuters GFMS showed that the world gold demand nose-dived 14 per cent during April-June 2015 at 858 tonnes compared with 1,000 tonnes in the corresponding quarter last year. Gold demand in the April-June 2015 quarter showed a decline of 15 per cent from the previous quarter.

Jewellery consumption in India rose 2.5 per cent year-on-year (y-o-y) to 158 tonnes. Retail investment was steady y-o-y at 50 tonnes. However, it surged from the first quarter on buying related to Akshaya Tritiya.

Gross imports in the quarter under review was down to the lowest in five quarters, falling to 183.9 tonnes against 205.4 tonnes last year - showing a y-o-y decline of 10 per cent, the survey revealed.

Thomson Reuters GFMS forecasts gold price to average at $1,135 an ounce (oz) in the July-September quarter and $1,175 an oz in the October-December period. In the second quarter of 2015 calendar year, average gold price fell to $1,192 an oz, the lowest in two years.

The weakness in Chinese demand provided some edge to India. Seasonal strength has seen India reclaim the top spot in total gold consumption. However, the first half was finely balanced with China narrowly edging out India at 394 tonnes versus 392 tonnes. With this weak demand, however, world gold supply surplus shot up to 196 tonnes.

“Physical gold demand in the second quarter of 2015 was at its weakest since 2009, as few markets reported increases and Chinese buyers stayed away from gold. Almost all major physical gold markets suffered in the second quarter as retail investment (demand for bars and coins) fell another 12 per cent y-o-y and is now some 63 per cent below the peak during April-June 2013. In the largest consuming sector, jewellery production declined six per cent y-o-y, while consumption was down nine per cent. This was in spite of a 7.5 per cent fall in average US dollar gold prices,” the survey noted.

Stock market growth was the story of the first five months in China and this saw substantially lower gold purchases. The retreat in June and July did not help gold purchasing either, as some investors were locked in and others were nervous about asset allocation. At 35 tonnes, Chinese retail investment (bar and coin purchasing) fell 26 per cent y-o-y, its weakest second quarter since 2009.

Jewellery purchases in China, often 24-carat investment material, also saw a fall in offtake to 102 tonnes during the second quarter, a 23 per cent y-o-y decline. Continued poor sentiment toward gold and better returns from equity markets have led many to shun the yellow metal. There are also signs that as a safe haven asset, some investors have moved toward the dollar.

“In June, the People’s Bank of China reported increased gold holdings for first time in six years; an extra 604 tonnes is within previous GFMS estimates for additional Official Sector purchases and so no revisions have been made to historical GFMS data,” the report said.