According to the latest Gold Demand Trends update from the World Gold Council or WGC, Indian jewellery demand plunged in Q2 due to nationwide lockdown, lost festival demand and the higher gold price. Indian jewellery demand fell 74% y-o-y to 44 tonnes (t) - the lowest quarterly total in WGC series. H1 demand was down 60% to an all-time low for our series of 117.8t.
The strict lockdown imposed in late March ran through until mid-May, encompassing the all-important gold buying festival of Akshaya Tritiya - one of the most auspicious days for buying gold in India. This year, however, the country-wide lockdown meant that physical store sales were not possible, and only those retailers with an online presence were able to cater to demand. Sales were trivial in comparison with the previous year.
As restrictions eased mid-quarter, activity started to recover in select regions. June saw a further improvement, with the release of some pent-up demand. However, a lack of weddings and auspicious days in the month, along with recurring lockdowns in certain regions and the high and rising gold price, prevented a meaningful recovery in demand.
Discretionary spending on gold jewellery shrank due to concerns around economic growth, future income and higher gold prices. India's GDP growth has been on a downward trajectory since Q1 2019 and this was accentuated by the outbreak of COVID-19. Economic slowdown, job losses and restrictions on store operations meant consumers became more cautious in opening their wallets to buy gold. Discretionary spending on gold jewellery was further quashed by local domestic gold prices - the average domestic price for Q2 was Rs 46,381 per 10 grams - 44% higher y-o-y.
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