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India’s gold demand could take bigger beating if prices continue to spiral upward

Sales slumped 18% from a year earlier & imports plummeted over half in the first quarter as prices surged & fresh Covid outbreak kept people away from stores, World Gold Council said.

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Mumbai: Gold demand in India, the world’s second-biggest consumer, could take a bigger beating if prices continue to spiral upward and inflation squeezes disposable incomes, according to the World Gold Council.

Sales slumped 18% from a year earlier and imports plummeted by more than half in the January-to-March period as prices surged and a fresh outbreak of coronavirus kept people away from stores, the London-based promotion group said. Fewer auspicious days for weddings, a key source of demand, and the decision by many households to delay purchases in anticipation of a price correction also added to the decline, it said.

The second-most auspicious gold-buying day of the year in the Hindu calendar is next week and while jewelers are pinning their hopes on Akshaya Tritiya for a sales boost, anecdotal evidence suggests that customers are shying away from purchases at current prices, according to P.R. Somasundaram, regional chief executive officer, at the council.

“Akshaya Tritiya demand will be better than what we saw in February and March, but clearly it is not going to be one where you will see people rushing to buy gold because the price point has still not been accepted by consumers,” Somasundaram said. “They will wait to see if these prices are sustainable or not.”

Gold posted its biggest quarterly gain in almost two years as the war in Ukraine, inflation and the outlook for the global economy burnished its haven appeal in the first three months of the year. Prices in India, which track their overseas counterpart, rose more than 8% during the quarter. The higher prices will boost recycling, or the sale of old jewelry, to 100 tons to 120 tons this year from about 75 tons the previous year, Somasundaram said.

Still, ample monsoon rains this year, which drive farm incomes, and growth in investment demand, could offset the impact of higher prices, Somasundaram said. Full-year demand for gold jewelry, coins and bars is likely to match the 797 tons bought in 2021.

Key quarterly data from WGC:

  • Net gold imports slumped 58% year-on-year to 132.2 tons, while sales fell 18% to 135.5 tons
  • Old jewelry sales jumped 88% from a year earlier to nearly 28 tons, the highest since July-September 2020
  • Higher prices meant that most of the purchases were of lightweight jewelry
  • Dealers offered discounts of as much $60 an ounce in March, the highest in 18 months, to local jewelers and other buyers to attract demand

Bloomberg


Also read: Gold declines Rs 258; silver tumbles Rs 327


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