Gold demand in India dips 7% YoY in June 2023 quarter as prices rise: WGC

The demand for gold in India dropped 7 per cent year-on-year to 158.1 tonne (170.7 tonne in the June 2022 quarter), said the World Gold Council (WGC) in a recent release. High gold prices, and a knee-jerk reaction to the ban on Rs 2,000 notes during the recently concluded quarter, WGC said, also dented sentiment for gold, especially the jewellery segment.

"Looking ahead for the rest of the year, we remain cautious about gold demand as it faces uncertainties due to elevated local prices and slowdown in discretionary spending. However, the success of the monsoon season could bolster sentiment ahead of Diwali season and throw positive surprises. With the first half of calendar year 2023 (H1-2023) demand at 271 tonne, our estimate for full-year (CY23) gold demand is in the range of 650-750 tonne," said Somasundaram PR, Regional CEO, India at the World Gold Council.

Meanwhile, value-wise, WGC pegged the total gold demand in India in the recently concluded quarter at Rs 82,530 crore, an increase of 4 per cent in comparison with Q2 2022 (Rs 79,270 crore), mostly due to a rise in gold prices.

Globally, gold demand (excluding OTC) dropped by 2 per cent YoY to 921 tonne during the June 2023 quarter. Inclusive of OTC and stock flows, however, the total demand was 7 per cent higher (YoY) at 1,255 tonne.

Gold prices, meanwhile, averaged $1975.93 per ounce (oz) in the June 2023 quarter, as compared to $1890/oz in the March 2023 quarter, and $1870.6/oz in the June 2022 quarter, the WGC data suggests.

Gold recycling

With the prices on a boil, gold buyers in India took to recycling gold instead with the total gold recycled in India in June 2023 quarter at 37.6 tonnes, as compared to 23.3 tonnes in the June 2022 quarter, translating into an increase of 61 per cent YoY. High prices of gold, the WGC said, contributed to a large extent in this besides the base effect.

"There was some evidence that high prices and consumer distress fuelled recycled gold supply growth. Meanwhile, weak jewellery demand was also reflected in low volumes of old gold jewellery being exchanged for new," WGC said.

Jewellery demand

The demand for gold jewellery in India, the WCG report suggests, witnessed a drop of 8 per cent y-o-y to 128.6 tonnes in the June 2023 quarter. The value of jewellery demand, however, rose 3 per cent YoY to Rs 67,120 crore (Rs 65,140 crore in June 2022 quarter). For the first half of calendar year 2023 (CY23), the demand for gold jewellery in India dropped 12 per cent YoY to 207 tonne.

WCG attributes the drop in demand for gold jewellery to record high rupee gold prices, which significantly impacted affordability and consumer sentiment. The demand for investment, too, dropped marginally by 3 per cent to 29.5 tonne from 30.4 tonne in the June 2022 quarter.

"There was a brief but notable impact on gold demand following the knee-jerk reaction to the ban of Rs 2,000 notes during the quarter. This highlights the sensitivity of Indian consumers to policy changes, which can have short-term effects on gold demand," said Somasundaram PR.