India's Gold demand fell 9% on year to 690.4 tonnes in 2019, the lowest since 2016, the WGC said in a report published on Thursday. A 17% y-o-y drop in Q4 generated a 24% decline for jewellery demand in second half of 2019. Total jewellery demand in 2019 dropped by 9% to 544.6 tonnes. Key factors behind the second half weakness were: higher gold prices (having reached record levels in Q3), domestic economic slowdown and muted rural demand. Weddings and retailer promotions checked the downfall to some extent.
Dhanteras - the first day of Diwali (the Festival of Light) which fell on 25 October - failed to bring cheer to gold demand in Q4 as the higher domestic gold price and weak economic sentiment curtailed gold sales. Festival demand received some support from advance wedding purchases and a dip in the gold price ahead of the November wedding season released some pent-up wedding-related demand,
but volumes were nevertheless soft compared with 2018.
The slowdown was less pronounced among the more organised national and regional chain stores. Branded chain stores continue to outperform other areas of the gold jewellery market, reporting far more modest declines in sales than medium-sized and standalone stores. Chain stores were better positioned to offer attractive promotions during Dhanteras and some launched new collections for Diwali and the wedding season, supporting their sales volume despite the higher gold price.
Similarly, demand for higher-value items was more resilient. As the economy has slowed, middle-class urban and rural consumers have become more cautious in opening their wallets. And with gold prices holding near record-high levels, this impacted demand for lightweight gold jewellery in Q4. But the volume of highticket purchases (heavyweight weddings items such as necklaces and waist chains/bands) held up relatively well. This reflected the broader resilience in higher-end sectors, which succumbed less easily to the challenging environment. Anecdotal reports suggest that diamond jewellery performed better in the quarter, and luxury car maker Mercedes Benz India y-o-y sales growth in Q4.
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