India’s gold demand in April-June plunges 70 per cent on COVID-19 disruptions
MUMBAI: Gold demand in India plunged 70 per cent during the April-June quarter to 63.7 tonnes compared with the same period last year mainly due to the nationwide lockdown to prevent the spread of COVID-19 and high prices, according to a World Gold Council (WGC) report.
Overall gold demand in the country was 213.2 tonnes during the second quarter of 2019, WGC said in its ‘Q2 Gold Demand Trends' report.
In terms of value, India's gold demand during the second quarter of this year was Rs 26,600 crore, down by 57 per cent compared to ₹62,420 crore in the corresponding period of 2019.
The total jewellery demand in India for the second quarter of 2020 decreased by 74 per cent at 44 tonnes compared to 168.6 tonnes in the same quarter of 2019.
Jewellery demand, in value terms, fell by 63 per cent during the April-June this year at ₹18,350 crore from ₹49,380 crore in the corresponding period last year.
Total investment demand for Q2 2020 declined by 56 per cent to 19.8 tonnes during the quarter under review against 44.5 tonnes last year.
In value terms, gold Investment demand during the second quarter witnessed a dip of 37 per cent at ₹8,250 crore from ₹13,040 crore.
Total gold recycled in the country also saw a decline of 64 per cent during April-June quarter at 13.8 tonnes from 37.9 tonnes in Q2 of 2019 as refineries were closed due to the nationwide lockdown.
Similarly, total gold imports in India in Q2 2020 sank 95 per cent to 11.6 tonnes during the quarter compared to 247.4 tonnes in Q2 2019 due to no movement.
The second quarter of 2020 was defined by lockdowns and high prices, both of which acted in combination to keep India's gold demand record low at 63.7 tonnes, down 70 per cent, WGC Managing Director, India, Somasundaram PR said.
Sales trend during the window of opportunity, afforded by relaxation of lockdown in select cities, do point to healthy latent demand that should surface once COVID-19 turbulence is behind us, he added.
11% drop in global demand
Global gold demand declined by 11 per cent during April-June to 1,015.7 tonne, but the demand for the yellow metal as an investment category witnessed a significant surge during the period, says a report.
According to a World Gold Council (WGC) report, the overall gold during April-June period fell to 1,015.7 tonne, from 1,136.9 tonne a year ago, due to lockdown in many countries to curb the spread of COVID-19 pandemic.
World Gold Council's "Q2 Gold Demand Trends" report noted that while the COVID-19 pandemic severely curtailed consumer demand, it provided support for investment.
The total investment demand increased significantly by 98 per cent to 582.9 tonne during the quarter, compared to 295 tonne in the same quarter of 2019.
Within the investment category, while the demand for bars and coins declined by 32 per cent to 148.8 tonne during the April-June period compared to 218.9 tonne in Q2 of 2019, the electronic traded fund (ETFs) in gold and similar products surged by a whopping 300 per cent to 434.1 tonne against 76.1 tonne last year, the report said.
"COVID-19 created the perfect storm for gold investment as historic liquidity injections and record low interest rates significantly cut the cost of carrying gold. We witnessed a surge in gold price along with record inflows into gold-backed ETFs in the first half of the year, WGC Market Intelligence Louise Street said.
Consumer demand hit
On the contrary, consumer demand took a brutal hit from the pandemic in the first of 2020, Street added.
Global jewellery demand dropped to a record low for the second consecutive quarter, declining by 53 per cent during the quarter under review to 251.5 tonne compared to 529.6 tonne in the same period last year.
Gold demand in technology also witnessed a drop of 18 per cent to 66.6 tonne during April-June, compared to 80.7 tonne in the same period last year.
Similarly, Central Banks net purchases declined by 50 per cent year-on-year to 114.7 tonne during Q2 of 2020, compared with 231.7 tonne during April-June last year.
"The decline in gold demand during the second quarter is mainly driven by weakness in the consumer market primarily due to lockdowns in India and China. However, the impact on gold demand due to high prices can only be gauged only after things come back to normal and we see how the consumers react to the bullishness in the yellow metal, WGC Managing Director, India, Somasundaram PR said over a telephonic conversation.
Meanwhile, the total supply during the quarter also dipped by 15 per cent year-on-year to 1,034.4 tonne.
The lockdowns implemented across Asia, Europe and North America severely disrupted the consumer-focused sectors of the market, with jewellery demand falling to unprecedented low Levels, Street noted.
Bars and coin investment slowed sharply, as a significant reduction in Asian demand masked the strong surge in Western investment, she opined.
"The consumer-focused sectors of the market will likely remain subdued for the next six months, but ongoing uncertainty and the threat of further waves of the pandemic mean that gold's safe haven status will appeal to investors for the foreseeable future," Street added.