Indian gold demand loses lustre
Fall off in buying in world’s second-largest metal consumer could limit global price rally
Mumbai — Gold prices near record highs could dampen demand in India during the peak festival season and lead to the lowest purchase volumes in three years, the World Gold Council said on Tuesday.
India is the world’s second-largest gold consumer and a drop in purchases could limit a rally in global prices. Falling demand for gold imports could also help narrow India’s trade deficit and support the rupee.
Higher prices in the December quarter, which traditionally sees the highest sales of the year, could cut back purchases, said Somasundaram PR, regional CEO of the World Gold Council’s Indian operations.
Gold demand in India usually strengthens towards the end of the year, which coincides with the traditional wedding season and festivals including Diwali and Dusherra, when bullion buying is considered auspicious. Diwali will be celebrated in mid-November.
Local gold prices jumped this week to 61,396 rupees per 10 grams, near the high of 61,845 rupees hit earlier this year. Last year, prices in the December quarter were nearly 20% lower than this year.
In the December quarter, demand is expected to be lower than last year’s 276.3 tonnes, Somasundaram said.
“Currently, price is a significant influencer. If there is a substantial drop in price closer to Diwali, the entire situation could change,” he said.
Indian gold consumption in the July-September quarter rose 10% to 210.2 tonnes, as both jewellery and investment demand improved due to a correction in local prices, he said.
From January to September, gold demand fell by 3.3% to 481.2 tonnes due to sluggish demand in the first half.
In 2023, demand could fall to about 700 tonnes, the lowest in three years, down from 774.1 tonnes a year ago, he said.
Higher gold prices have been prompting some people to sell their old jewellery and coins, leading to a jump in scrap supplies by 37% from a year ago to 91.6 tonnes in the first nine months, World Gold Council data showed.
The trend would continue in the December quarter if prices remain around the current level, Somasundaram said.
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