Gold Regains Lustre with 37% Demand Surge in Q1

India's gold demand recovered during the January-March period to witness a growth of 37 per cent at 140 tonne compared to the same quarter of 2020, due to ease of Covid-related restrictions, pent up demand and softening of prices of the yellow metal, according to the World Gold Council (WGC).

The overall gold demand stood at 102 tonne during the first quarter of 2020, as per WGC data.

Gold demand in value terms increased by 57 per cent during the first quarter of this calendar year to Rs 58,800 crore compared to Rs 37,580 crore in the corresponding period of 2020.

Total jewellery demand was up by 39 per cent at 102.5 tonne compared to 73.9 tonnes during January-March 2020.

In terms of value, to Rs 43,100 crore from Rs 27,230 crore in the same quarter of last year.

Investment demand for the quarter under review increased by 34 per cent to 37.5 tonne in comparison with 28.1 tonne in the same period of 2020, while in value terms it was up by 53 per cent at Rs 15,780 crore from Rs 10,350 crore during January-March of last year.

Total gold recycled in the country witnessed a drop of 20 per cent during the first quarter of this calendar year at 14.8 tonne compared to 18.5 tonne in the same quarter of 2020.

Net bullion imports in India during January-March 2021 stood at 301 tonne compared to 83.1 tonne in the corresponding period of last year, an increase of 262 per cent.

"India's first quarter of CY 2021 gold demand rose 37 per cent to 140 tonne on the back of Covid containment and positive sentiment following the start of the vaccination programme.

“A combination of softening gold prices to around Rs 47,000 per 10 grams, buoying consumer sentiment following sharp pick-up in economic activity and return of social activities like weddings supported a 39 per cent growth year-on-year (YoY) in gold jewellery demand at 102.5 tonne," WGC Managing Director, India, Somasundaram PR told PTI here.

The average domestic gold price of Rs 47,131 per 10 gram was 14 per cent higher YoY but 6 per cent lower quarter-on-quarter and 16 per cent lower than the August 2020 peak of Rs 56,000, he noted.

"Slide in gold prices below Rs 50,000 removed a psychological barrier for the consumers and spurred bargain buying and wedding-related accumulation, releasing pent-up demand. Indian retail gold investment demand also improved for a third consecutive quarter. Bar and coin demand grew 34 per cent YoY, the strongest first quarter in India since 2015," he pointed out.

Further, he said, a reduction in customs duty on gold, together with an appreciating rupee throughout much of the quarter, also helped lower prices and presented significant buying opportunities for retail investors.

Robust consumer demand, combined with stock building among the trade ahead of key festivals, including Akshaya Tritiya in May, were the primary drivers of the strong rise in imports, Somasundaram said.

"The outlook for the coming quarter is, however, cautious. As lockdowns are re-imposed in various regions of the country in response to rising Covid-19 cases, consumer confidence has dipped. This is likely to impact wedding demand in the second quarter," he said.

Digital and omni-channel retail strategies developed over the last year by many players may cushion the drop unlike the second quarter of 2020, but the current crisis is beyond just economics and logistics, therefore, sentiment may be affected till large scale vaccination is achieved, he opined.

"We are unable to quantify the impact on full year gold demand as we do not have sight of several critical factors currently at play," he added.