India's gold demand in April-June sinks 70% on Covid-19 disruptions: WGC

Gold demand in India plunged 70 percent during the April-June quarter to 63.7 tonnes compared with the same period last year mainly due to the nationwide lockdown to prevent the spread of Covid-19 and high prices, according to a World Gold Council (WGC) report.

Overall gold demand in the country was 213.2 tonnes during the second quarter of 2019, WGC said in its 'Q2 Gold Demand Trends' report.

In terms of value, India's gold demand during the second quarter of this year was Rs 26,600 crore, down by 57 percent compared to Rs 62,420 crore in the corresponding period of 2019.

The total jewellery demand in India for the second quarter of 2020 decreased by 74 percent at 44 tonnes compared to 168.6 tonnes in the same quarter of 2019.

Jewellery demand, in value terms, fell by 63 percent during the April-June this year at Rs 18,350 crore from Rs 49,380 crore in the corresponding period last year.

Total investment demand for Q2 2020 declined by 56 percent to 19.8 tonnes during the quarter under review against 44.5 tonnes last year.

In value terms, gold investment demand during the second quarter witnessed a dip of 37 percent at Rs 8,250 crore from Rs 13,040 crore.

Total gold recycled in the country also saw a decline of 64 percent during April-June quarter at 13.8 tonnes from 37.9 tonnes in Q2 of 2019 as refineries were closed due to the nationwide lockdown.

Similarly, total gold imports in India in Q2 2020 sank 95 percent to 11.6 tonnes during the quarter compared to 247.4 tonnes in Q2 2019 due to no movement.

“The second quarter of 2020 was defined by lockdowns and high prices, both of which acted in combination to keep India's gold demand record low at 63.7 tonnes, down 70 percent,” WGC Managing Director, India, Somasundaram PR said.

Sales trend during the window of opportunity, afforded by relaxation of lockdown in select cities, do point to healthy latent demand that should surface once Covid-19 turbulence is behind us, he added.

He said, demand for jewellery dropped by 74 percent to 44 tonnes, in an atmosphere of fear and uncertainty where weddings were postponed or just turned out to be uncharacteristically quiet and private.

“Investment demand fared relatively better, with demand drop lower at 56 percent to 19.8 tonnes - as gold's safe haven attributes and perhaps some price increase anticipation attracted HNIs and investors.

“Naturally, online buying convenience played a significant part in consumer behaviour during lockdown, as we saw gold exchange traded funds (ETFs) grow after being dormant for many years,” he noted.

Digital gold too saw significant activity, though volumes are yet negligible in the overall demand scenario, he said adding that logistical issues and poor demand crashed imports by 95 percent, to a mere 11.6 tonnes.

“Overall, gold demand in India in H1 2020 was 165.6 tonnes, plummeting 56 percent in comparison to H1 2019, despite marginal increase of gold ETF buying in keeping with global trends,” he stated.

Going forward, he said, India's Covid-19 journey in H2 will chart the course and pace of economic revival of which gold demand is an integral part.

“A sense of optimism is developing amongst trade, however, that, by Dhanteras, Covid-19-related disruptions may matter less as society learns to live with it, with a possible upside following some positive news on treatment.

“This should spur consumer confidence, and jewellery demand will play a big role in bringing things to normalcy. Fast rising gold prices could act as headwinds though,” he added.

The price is currently a life-time high of over Rs 50,000 per 10 grams, a key milestone and response is naturally mixed – with content investors and wary consumers and to put it in perspective, gold prices have risen by 60 percent since January 2019 and 20 per cent since January 2020, income growth or expectation have not kept pace with this, Somasundaram said.

“As we are still in the midst of the crisis without clear sight of many variables on consumer behaviour, prices or length of the disruption, we will not be able to quantify the impact on the full-year gold demand in India,” he added.