Indian gold demand rises 10 per cent in September quarter; festive outlook muted

Indian gold demand during the September quarter registered a 10 per cent rise to 183.2 tonne from a year earlier, as prices fell significantly resulting in bargain buying, the World Gold Council (WGC) said in a report Thursday. Going forward, however, the seasonal spike in gold demand could be moderate this Dhanteras-Diwali, owing to factors like a lack of liquidity and rising prices.

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According to WGC's 'Q3 Gold Demand Trends' report, in value terms, the country's September quarter gold demand went up by 14 per cent to Rs 50,090 crore, compared to Rs 43,800 crore.

"A dip in the gold price in the early part of the quarter to around Rs 29,000 per 10 grams (with taxes) its lowest level since January 2018 - spurred demand," WGC Managing Director, India, Somasundaram PR told PTI here.

The rupee's depreciation however, impacted the local price which surged sharply to around Rs 32,000-33,000 per 10 grams (without taxes) and demand eased towards the later half of the quarter.

"A combination of factors such as lack of buying occasions, disruption caused due to floods in a key gold market (Kerala) and an intervening inauspicious period affected demand," he added.

The last quarter of the year (October-December) is normally a vibrant period for gold related purchases as demand rises amid festivals and wedding season.

However, the seasonal spike in demand could be moderate this year due to factors like a "lack of liquidity, rising Indian prices and impending elections in some key states impacting trade logistics," Somasundaram said.

He further added that "we estimate full year Indian gold demand to be at the lower end of 700-800 tonnes range".

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The report noted that the total jewellery demand for the September quarter of this year was up by 10 per cent at 148.8 tonne compared to 134.8 tonne in same period last year.

In value terms jewellery demand saw 14 per cent growth at Rs 40,690 crore in the third quarter this year from Rs 35,610 crore in the corresponding quarter of 2017.

The report further noted that after minor purchases over recent months, the Reserve Bank of India ramped up its buying in the September quarter, increasing reserves by a further 13.7 tonne. "This brings year-to-date purchases to 21.8 tonne," it said.

Meanwhile, total investment demand was up by 11 per cent at 34.4 tonne in comparison to 31 tonne in Q3 2017. In value terms, investment demand was up by 15 per cent at Rs  9,400 crore from Rs 8,200 crore in Q3 2017.

Total gold recycled in the country declined by 13.85 per cent to 23 tonne, compared to 26.7 tonne in the same quarter of 2017, according to the report.

Talking about imports, he said, it increased by 55 per cent mainly due to the low price during the initial part of the quarter and the threat of duty increase on gold to 269 tonne compared to 173 tonne in Q3 of 2017.