Demand for gold from Indian consumers rose 15% year-on-year to 124 tonnes in the first quarter of 2017 following continued remonetisation by the central bank that buoyed consumer sentiment, according to a report.
According to the latest Gold Demand Trends report by the World Gold Council (WGC), Indian consumers enjoyed a period of relative stability in the domestic market.
Continued remonetisation by the Reserve Bank of India (RBI) buoyed consumer sentiment encouraging demand ahead of the wedding season, the report said.
Interestingly, higher demand in India was the prime reason for the overall jewellery demand gaining marginally at 481 tonnes.
But demand remained relatively weak in an historical context, 18% below the five-year quarterly average, the report said.
However, there was overall decrease in the global demand for gold in the same quarter though there was a slight increase in demand for the yellow metal for investment purposes in the form of bars and coins along with jewellery, the report said.
Exchange traded funds
The report said global demand for gold in the first quarter of 2017 was 1,034 tonnes, a decrease of 18% compared with the first quarter of 2016. The report attributed the decline to a slowdown in demand by central banks along with smaller flows into exchange-traded funds (ETFs).
“Demand is down year-on-year, but that is largely because Q1 last year was exceptionally high,” said Alistair Hewitt, Head of Market Intelligence at the World Gold Council.
“Although we did not see the record-breaking surges in ETF inflows experienced in Q1 2016, we have seen good inflows nonetheless this quarter with strong interest from European investors ahead of the Dutch and French elections,” said Mr. Hewitt.
Central banks added only 76 tonnes to their reserves, falling 27% from the first quarter of 2016. Incidentally, China’s purchasing programme was on a pause during the quarter as its foreign exchange reserves remained under pressure.
Experts said while the overall demand had decreased, one needs to consider the fact that the first quarter of 2016 saw exceptionally high record demand. Interestingly, bar and coin investment was healthy at 290 tonnes, an increase of 9% year-on-year, while demand firmed up slightly in both the jewellery and technology sectors, it said. Chinese investors played a key role in the increased demand. Meanwhile, gold ETFs saw flows accounting for 109 tonnes but largely concentrated in Europe.
