India’s total gold demand for Q1 (January-March) 2022 fell 18% year-on-year to 135.5 tonnes as consumers held back purchases due to rising gold prices, a fall in the number of weddings, and the lack of auspicious gold-buying days, World Gold Council’s (WGC’s) latest Gold Demand Trends Report revealed. India’s Q1 2022 gold demand value was Rs. 61,550 crore, down by 12% as compared to Q1 2021 (Rs. 69,720 crore), it noted.
The combination of factors proved detrimental to jewellery buying, WGC said. Gold jewellery demand in India for Q1 2022 decreased by 26% at 94.2 tonnes as compared to Q1 2021 (126.5 tonnes). The value of jewellery demand was Rs. 42,800 crore, down by 20% from Q1 2021 (Rs. 53,200 crore).
Somasundaram PR, Regional CEO, India, World Gold Council said: “Since 2010, barring the pandemic periods, this is only the third time the Q1 total has been below 100 tonnes. Fewer auspicious days coupled with a sharp rise in gold prices meant fewer weddings and a pause in retail demand, with households postponing gold buying in anticipation of a price correction.”
The gold price breached the key psychological Rs. 50,000/10gm at the end of February, before rising to above Rs. 53,000/10gm in March. In response, consumers postponed gold purchases, hoping for a price correction… or at least a stabilisation. Sluggish demand in March resulted in the local market discount widening as far as US$60/oz – its highest for 18 months, the report added.
India’s total investment demand for Q1 2022 at 41.3 tonnes increased by 5% in comparison to Q1 2021 (39.3 tonnes). In value terms, gold investment demand in Q1 2022 was Rs. 18,750 crore, up by 13% from Q1 2021 (Rs. 16,520 crore).
Somasundaram added, “Investment demand, primarily gold bars and coins, however, grew 5% to 41 tonnes, rising prices and volatility in equity markets acting as support. With safe-haven demand and rupee depreciation pushing gold prices above Rs.50,000/10g, discussions with trade revealed that most of the buying was lower ticket items such as 10g and below.”
Total gold recycled in India in Q1 2022 was 27.8 tonnes, up by 88% compared to14.8 tonnes in Q1 2021. Total net bullion imports in Q1 2022 was 132.2 tonnes, decrease of 58% compared to 313.9 tonnes in Q1 2021.
Somasundaram noted, “Overall Indian gold demand fell 18% this quarter and with recycling up by 88%, net bullion imports for the quarter was lower by 58% y-o-y. The hiatus in growth could be a result of mixed sentiments in the market about price, uncertainty about covid caused by news in the neighbouring market, fear of inflation and long term impact of the global conflict. We believe these developments will cause trade and consumer sentiments turn firmly positive for gold. “Despite a brief wave of Covid at the beginning of the year, India’s economic growth continues to rebound from the pandemic era slowdown. The impact of revival in the rural markets, more particularly with forecast of a normal monsoon for a fifth consecutive year, is likely to be significant for gold in 2022. The ongoing geopolitical situation has reinforced gold’s role as a mandatory asset in every portfolio for its diversification and hedging properties when it matters, and this will strengthen the relevance of gold across the spectrum.”