The high import duty and supply curbs on gold had a telling effect on demand for the yellow metal gold in the first quarter of calendar 2014 when demand slid 26 per cent to 190.3 tonnes. Figures released by World Gold Council’s (WGC) India demand statistics showed that in value terms, it slid 33 per cent to Rs. 48,853 crore and 41 per cent in dollar terms to $7.9 billion.
Of this, jewellery demand declined 9 per cent to 159.5 tonnes and 18 per cent in value terms to Rs. 37,377.8 crore while investment demand declined 54 per cent in volume terms to 44.7 tonnes and 59 per cent in value terms to Rs. 11,475.2 crore.
“The Q1 2014 figures are on the back of three quarters of gold supply curbs and the figures reflect an underlying demand for gold,” Somasundaram P.R., Managing Director, India, WGC, told this correspondent.
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“They illustrate the continued impact of higher import duties and supply curbs imposed on the gold market in an effort to reduce the country’s current account deficit.”
With the election of the BJP and its declared pro-business approach, there is an expectation that the short-term curbs on gold will be removed, he said. “Another factor is the hope that there will be relaxation of the curbs which will lead to a reduction in the prevailing premium. The fact that the government has the intent to do away with the curbs is not in debate but the timing cannot be predicted,” he said.
Mr. Somasundaram said WGC expected Indian gold demand in 2014 to “track the long-term average and total 900-1,000 tonnes as there is no real event-led driver.”
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Meanwhile, WGC said that total global demand in Q1 was fractionally lower at 1,074 tonnes (1,077 tonnes) while in value terms it was down 21 per cent at $45 billion. Total global jewellery demand rose 3 per cent to 571 tonnes while investment demand was fell 2.5 per cent at 282 tonnes.
In a statement, Marcus Grubb, MD, Investment Strategy, WGC, said, “It is clear that the longer-term underpinnings of the gold market—such as jewellery demand in Asia—remain firmly in place, demonstrating the continuing resilience of the gold market and the unique nature of gold as asset class, rebalancing to reflect demand.”