In contrast to global demand for gold which declined by 2 per cent in the third quarter of calendar 2014, India’s appetite for the yellow metal surged 39 per cent during the same period in volume terms to 225.1 tonnes.
Although this was on a low base last year, when the government restrictions on gold were introduced, gold jewellery demand surged 60 per cent to 182.9 tonnes, according to figures released by World Gold Council (WGC). However, investment demand in India over the same period declined 10 per cent to 42.2 tonnes. There was a marked decline in gold recycled during the period at 18.2 tonnes (53 tonnes).
In value terms, India’s demand for gold rose 31 per cent at Rs 56,219.3 crore with jewellery demand up 51 per cent at Rs 45,681.6 crore and investment demand down 16 per cent at 10,547.7 crore.
"The figures indicate the intrinsic demand for gold in India," Somasundaram P.R., MD, India WGC told this correspondent. "While the low base of Q3 2013 was due to the duty increases and restrictions on import of gold, the demand for gold around Diwali reflects the general optimism in India around the economy." He said part of higher jewellery demand was the preference over gold coins and bars.
In the nine month period (January-September 2014), India’s gold demand declined 23 per cent to Rs 155,636.6 crore in value while volumes were down 18 per cent to 619.5 tonnes. Mr. Somasundaram said that gold demand for the full year 2014 was likely to be 850-950 tonnes. "Unless there are any significant changes in the macro economy, there are no factors to drive demand significantly up or down. As regards restrictions, there should be a vision instead of regulatory arbitrage and we must have structurally enabling measures."
Globally, gold demand declined 2 per cent to 929 tonnes during the quarter. Central banks were net buyers of gold for the 15th consecutive quarter, buying 93 tonnes (101 tonnes) during Q3FY14. The Swiss government is to hold a referendum in end-November to mandate the holding of 20 per cent of their reserves in gold as against 8 per cent levels. If passed, Switzerland would need to buy around 1500 tonnes of gold over five years for a stronger gold-backed currency. "The holding of a referendum is in itself an affirmation of the increasing importance of gold globally," Mr. Somasundaram said.
