India's gold demand drops 28% in Q3: World Gold Council
"Institutional investors have looked to hedge against uncertainty stemming from geopolitical risk, including Brexit, the US presidential race and the potential impact of elections in France and Germany next year (2017)"
India's gold demand dropped by 28 percent in third quarter of 2016 due to higher prices and increased smuggling as the government seeks to bring transparency to bullion purchases, the World Gold Council (WGC) said in its report.
In its report in Tuesday, WGC said that demand for gold in July-September quarter was 194.8 tonnes, 28 percent lower than 271.1 tonnes during the corresponding quarter in 2015. If seen in terms of value, India's Q3 2016 gold demand was Rs 55,970 crore, which is a drop of 12 percent when compared to Rs 63,660 crore in the similar quarter in 2015.
The report added that during the first nine month of calendar 2016, India’s total gold demand stood at 441.2 tonnes, 28.9 percent lower than 621.2 tonnes reported in the same period in 2015.
"While an elevated price level was an obvious factor for the drop in volume, other issues appear to have had an impact on demand -- such as the trade strike following the introduction of excise duty, the regulation on PAN card for purchases above Rs. 2 lakh and the subdued sentiment on gold buying when the income disclosure scheme was running," said Somasundaram PR, Managing Director, India, World Gold Council.
It has been estimated by World Gold Council that the full year demand would be in the range of 650-750 tonnes. "Good monsoon and a drop in the gold price ahead of Diwali augur well for strong seasonal demand in Q4 that will likely restore the demand trajectory to normal levels," Somasundaram said.
In addition to this, total jewellery demand for third quarter of 2016 was down by 28 percent at 154.7 tonnes. The total gold investment demand for the quarter 3 fell by 30 percent at 40.1 tonnes.
Reportedly, Gold price increased by a sharp 22 percent to an average Rs 28,733.9 per 10g for the third quarter this year from an average Rs 23,476.1 per 10g in the same period last year. In dollar term, too, average gold price jumped by 19% to $1334.8 an oz for July – September 2016 compared to $1124.3 an oz for the same quarter last year.
Globally, gold demand reached 993 tonnes in the third quarter of 2016, 10 per cent less than in the similar period in 2015. "Net inflows into Exchange-traded products (ETPs) helped drive a sharp increase in investment demand, but this was not enough to offset falls in other areas, notably jewellery and purchases by central banks," the statement pointed out.
Alistair Hewitt, Head of Market Intelligence at the World Gold Council said, "We continued to see flows into gold-backed ETPs in Q3, taking year-to-date inflows at the end of September to 725 tonnes. Institutional investors have looked to hedge against uncertainty stemming from geopolitical risk, including Brexit, the US presidential race and the potential impact of elections in France and Germany next year (2017).”
"In addition, negative interest rates -- a theme ever present this year -- continued to underpin institutional demand," he added.