Q1 Gold demand in India surges by 15 per cent

India continues to have faith in gold as the Q1 overall gold demand in India increased by 15 per cent says Gold Demand Trends Q1 2015 report.

This year, the overall demand for gold during January-March period was at 191.7 tonnes as compared to overall demand of 167.1 tonnes during the same period last year.  The demand rose to 191.7 tonnes mainly due to a 22 per cent rise in jewellery against a low base from 2014. While India saw overall gold demand increase by 15 per cent in Q1 2015, it is worth noting that Q1 2014 was a low base and in a longer term context Indian demand for the quarter was average to weak.

Total global jewellery demand was 601 tonnes in the first quarter, a fall of 3 per cent on the same quarter last year. In India, jewellery demand was 151 tonnes, 22 per cent higher than the same period last year albeit from a very low base. There was a surge in imports in March, driven partly by increased certainty following the budget announcement on Feb 28th and also as a result of widespread restocking by Indian jewellers ahead of the festival and wedding season.

Total investment demand was up 4 per cent to 279 tonnes, compared to 268 tonnes in the same quarter the previous year. Demand for bars and coins fell 10 per cent from the previous year to 253 tonnes as retail investors, notably in India, diverted their money into equities in the wake of the country’s strong stock market performance. However, ETFs saw their first inflows since Q4 2012, albeit at the modest rate of 26 tonnes.

Central bank net purchases were 119 tonnes in Q1 2015, unchanged on the same period in 2014 and the 17th consecutive quarter in which central banks have been net purchasers as they diversify their assets.   Total supply remained virtually unchanged at 1,089 tonnes as a 2 per cent rise in Q1 2015 mine production to 729 tonnes was balanced by a 3 per cent fall in recycling to 355 tonnes, compared with the same quarter last year.

Commenting on gold demand in India, Somasundaram PR, MD, India, WGC said “India’s gold demand during the first quarter of 2015 was up 15 per cent compared to the corresponding quarter last year, though it is still below the 5-year average. This growth is a reflection of the muted demand in the same period as last year due to crippling gold import policies coupled with weak economic sentiment and trade uncertainty at the time of the general elections. In contrast, following the partial removal of the import curbs (with the exception of a duty reduction) and the budget announcements introducing new gold products, the environments for gold had been encouraging in the past few months, resulting in buying behaviour slowly returning to normalcy.”

In regards to India, WGC concluded that though the unseasonal rains will impact the rural economy, full year demand expectations are in the range of 900-1000 tonnes. An upward revision of GDP growth, government’s approach to bring gold in the mainstream economy, ensuring that gold becomes a fungible asset akin to any financial asset, the country’s natural affinity with gold as savings asset which will support it becoming embedded in the financial sector and finally the modernization of the jewellery trade will shape a positive environment for gold this year.

Comments are closed.