Indian gold demand is likely to slow down in the second quarter (April-June) due to COVID-related restrictions, before rebounding in the second half of 2021, according to the World Gold Council (WGC).
The market development organisation for the gold industry said demand for gold in the January-March quarter saw a growth of 37% year-on-year (YoY) at 140 tonne due to ease of restrictions, pent-up demand and softening of prices. Net bullion imports during the period saw a 262% YoY increase to 301 tonne.
Somasundaram PR, managing director of WGC (India), said with lockdowns being re-imposed in various regions, consumer confidence has dipped and this is likely to impact wedding demand in Q2 of 2021. “First quarter demand was very good in spite of a 14% y-o-y increase in gold prices. Traders also felt that business will be good and imported more. But the disruption due to the pandemic may mean a muted Akshaya Tritiya. Last year, the festival was a complete washout,” he said.
However, Somasundaram believes that the second half of 2021 could see a rebound in demand. “By June, things may come back due to the actions taken by the government. The Western economies seem to have a grip on vaccination and how to proceed to open the market. This is also the reason that interest rates have started firming up and dollar strengthening. Gold prices have started to soften up. Softer prices, better monsoon and better control of the pandemic could become positive for India.” Gold imports could also go up on higher demand. In 2020, gold imports declined sharply to 446.4 tonne due to lockdowns and higher prices.
Total jewellery demand in India for Q1 2021 was up by 39% at 102.5 tonne, compared to 73.9 tonne in Q1 2020. The value of jewellery demand was at Rs 43,100 crore, a rise of 58% from Rs 27,230 crore in Q1 2020.
According to WGC data, total investment demand for Q1 2021 increased 34% y-o-y to 37.5 tonne.
Overall, global gold demand at 815.7 tonne was on par with the preceding quarter, but 23% lower y-o-y, as gold-backed exchange-traded funds saw an outflow of 177.9 tonne.