India’s Q2 Gold Jewellery Demand Muted By Second Covid Wave: WGC

India’s appetite for gold remained subdued through the second quarter (April-June) of 2021 that bore the brunt of the second Covid wave, which caused partial lockdowns and stoked fears of economic uncertainty. When measured against the Covid-disrupted, low baseline of 2020, Q2 2021 showed a 19.2% growth in Indian gold demand to 76.1 tonnes, the World Gold Council (WGC) reported in its latest Gold Demand Trends report.

Gold jewellery demand in India for Q2 2021 was up by 25% at 55.1 tonnes as compared to 44 tonnes in Q2 2020. By value, the country’s Q2 jewellery demand grew 29% to Rs.23,750 crore year-on-year.

Somasundaram PR, Regional CEO – India, WGC, said: “Q2 2021 was marked by widespread regional lockdowns following rise in covid infections. Unlike the previous year when a national lockdown took businesses by surprise, this quarter was relatively better as businesses were more prepared. The impact was however severe as it muted demand during Akshaya Tritiya and wedding season in Q2.

“Digital solutions and pause in restrictions in pockets helped a growth of 25% in jewellery demand, to 55.1 tonnes. Investment demand grew 6% to 21 tonnes as prices softened. Interestingly, as imports surged to 120.4 tonnes in anticipation of pick up in fabrication. Overall, gold demand in India in H1 2021 was 216.1 tonnes, up 30% versus H1 2020. Though it is still a multi-year low, it reflects an underlying demand momentum that will likely support a sharp spike in demand once normalcy is restored on the covid front.”

Somasundaram noted that the outlook for H2 2021 is uncertain, as consumer confidence and business response are subject to the impact of a looming threat of third wave of covid and the pace of economic recovery. “One view, most comforting, is that given the pace of vaccination and the sero survey results, as a society, we may learn to live with covid and its variants, ensuring businesses and sales become more resilient,” he said.

In response to a question during a virtual press conference on 29th July, Somasundaram noted that mandatory hallmarking and its subsequent operational challenges faced by retailers will not impact gold demand in Q3 2021. “Any purchase restriction faced in physical stores can easily be met by digital platforms that have flourished since Covid. The increased transparency on digital platforms will give a fillip to digital buying of gold jewellery,” he noted.

“Dhanteras and the upcoming season which has more auspicious wedding days in Q4 2021 compared to the previous year appear positive for demand,” Somasundaram said.

“For the gold investment segment, however, attractive equity markets and volatile gold prices are strong headwinds. Consumer behaviour is linked to several economic and non-economic variables that pose great difficulty in making any forecast of full year gold demand in India,” he stated.

The total gold recycled in India in Q2 2021 was 19.7 tonnes, as compared to 13.8 tonnes in Q2 2020, an increase of 43%. The country’s total gold imports in Q2 2021 were 120.4 tonnes, as compared to 10.9 tonnes in Q2 2020, an increase of 1004%.

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