India’s gold demand in 2020 falls one third YoY to 446.4 tonnes

India’s gold demand in 2020 falls one third YoY to 446.4 tonnes

India’s gold demand in 2020 fell by over a third from 2019 settling at 446.4 tonnes on the back of Covid-induced lockdowns and lifetime high prices, according to the World Gold Council.

The silver lining in this falling of gold demand is the growing interest among consumers to treat gold as an investment product which has been reflected in the Q4 of 2020. Investment demand was up 8% to 48.9 tonnes from 45.3 tonnes in Q4 2019.

Somasundaram PR, managing director, India, World Gold Council, said investment demand is expected to remain strong in 2021 due to the low-interest rate regime and uncertainty over economic recovery.

However, the drop was significantly lower when viewed in value terms, 14% lower than 2019 as prices were up 34% hovering around Rs 50,000/10grams for most part of the year. Jewellery demand fell 42% to 315.9 tonnes and investment demand fell by 11% to 130.4 tonnes in 2020, mainly due to pandemic related restrictions.

However, in Q4 2020, the festive period and the ensuing wedding season revived hopes and drew in jewellery demand worth 137.3 tonnes—the strongest quarter in the year. Investment demand also showed significant resilience, growing 8% to 48.9 tonnes.

Predictably, as lockdowns eased and normalisation efforts were phased in, imports in Q4 rose 19% year-on-year, pointing to the positive impact of pent-up demand. This can be expected to continue into 2021 as further normalcy returns and steady course of reforms strengthen the industry.

From the consumer’s perspective, there is acceptance of the current high price levels as the new normal. In addition, current high stock indices and low interest rates will add significant weightage to gold amidst inevitable return of celebrations and festivities.

“We could see a strong spurt in gold demand for the next few years, a repeat of what happened after a sharp drop in 2009. In such a scenario, the current high tax on gold increases the lure of smuggling, so duty cut to reasonable levels are absolutely necessary along with tax concessions for recycling gold, innovations and digital interventions. The year 2021 will likely set a trend of long term growth in Indian gold demand and the benefits of such growth can be explicitly captured if coordinated policy measures are sustained, making gold a mainstream asset class,” the WGC India chief said.

Total jewellery demand in India for 2020 was down by 42% at 315.9 tonnes as compared to 544.6 tonnes in 2019. Total investment demand for 2020 was down by 11% at 130.4 tonnes in comparison to 145.8 tonnes in 2019. Total gold recycled in India in 2020 was 95.5 tonnes as compared to 119.5 tonnes in 2019.

Demand for gold in India for Q4 2020 was at 186.2 tonnes down by 4% as compared to overall Q4 demand for 2019 (194.3 tonnes). Total jewellery demand in India for Q4 2020 was down by 8% at 137.3 tonnes as compared to Q4 2019 (149 tonnes). Total investment demand for Q4 2020 o In value terms, gold investment demand was Rs. 21,730 crores, an increase of 41% from Q4 2019 (Rs. 15,360 crore).

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