Gold jewellery demand in India declined to 544.6 tonnes in 2019, a fall of 9% as compared to the earlier year, according to figures published by World Gold Council in the latest edition of its Gold Demand Trends. By value, however, demand rose by 3% in rupee terms to Rs 171,790 crore, but remained flat at US$ 24.4 billion in dollar terms),

Overall consumer demand in the country was also 9% down, the publication revealed, falling to 690.4 t in 2019 as against 760.4 t in 2018, with retail investment falling 10% to 145.8 t (2018: 162.4 t), and up a mere 2% in rupee terms. The decline was largely on account of a surge in the price of the yellow metal to a new six year high in dollar terms during the second half of the year, with the “domestic economic slowdown and muted rural demand” also having an impact.

Gold jewellery demand in the country dropped 17% in Q2 and generated a 24% decline in H2 2019. “While Q4 saw the second lowest quarterly demand in a decade, the H2 figures were at their lowest level in this period,” said Somasundaram PR, MD, India, WGC, adding that prices in rupee terms surged 20% in H2, touching a new all-time high within the country.

“The fall could have been bigger, but a brief dip in prices just prior to the wedding season, provided some support, especially for wedding related purchases,” Somsundaram added.

Within India, WGC said that “middle-class urban and rural consumers have become more cautious in opening their wallets” which “impacted demand for lightweight gold jewellery in Q4”. However, it pointed out that “the volume of highticket purchases (heavyweight weddings items such as necklaces and waist chains/bands) held up relatively well… (which) reflected the broader resilience in higher-end sectors”.

The other major gold consumer, China too saw weak demand, WGC said. Together, the two gold consuming giants accounted for 80% of the y-o-y decline in Q4 2019 jewellery and retail investment demand.

The gold price averaged US$1,481/oz in Q4 – its highest quarterly average since Q1 2013. Although the price remained below the Q3 high of above US$1,550/oz, it was well supported throughout the quarter. Gold priced in various currencies – including euro, Indian rupee and the Turkish lira – hit their highest levels in history.

The price rise globally was driven by a slowdown in the global economy leading to three rate cuts by the US Fed, reversing the trend of the previous year, as well as political uncertainty, sparked by the US-China trade war, the HK protests, the tension in the Middle East and other factors.

In such a situation, gold became a ‘safe-haven’ for investors, and global ETF demand reached record highs. “Inflows into gold-backed ETFs and similar products pushed global holdings to a record year-end total of 2,885.5t,” WGC noted. Central Bank buying also reached a remarkable 650.3t – the second highest level for 50 years and only 6t less than in 2018.

Alistair Hewitt, Head of Market Intelligence at the World Gold Council, said, “Looking ahead, we expect gold’s safe haven qualities to remain at the forefront of investors’ minds as they navigate global tensions, low yields, and stretched equity valuations.”

WGC believes that Indian demand in 2020 will be between 700-800 tonnes. If, as expected, there is an improvement in the broader economic scenario which will boost consumer confidence, demand may rise by 10-12% to 800 t, Somasundaram said, stating that even otherwise it is likely to remain about 2019 levels, or near 700 tonnes.