India’s demand for gold in 2016 is expected to drop to a seven-year low as elevated price levels and stringent government rules requiring PAN card for purchase above Rs 2 lakh have impacted sales during the first nine months of this year.
According to the World Gold Council (WGC), India’s total consumption of gold in 2016 is likely to be in the range of 650-750 tonnes, lowest since 2009 and far behind the last year’s 858.1 tonnes.
Indian’s consumed 441.2 tonnes of gold during January-September 2016, 28.9 per cent lower than the same period last year.
While the total jewellery demand in India was down 29.9 per cent at 340.5 tonnes, the investment demand fell by 25.3 per cent to 100.7 tonnes in 2016. The industry body pointed out that the domestic gold prices, which remained in the range of Rs 30,000–31,000 per 10 gramme were a deterrent to gold consumers, having last been at such lofty levels in 2013.
“Indian consumers would gradually adapt to higher prices — we have seen this many times before — but price volatility combined with higher prices is a damaging combination,” WGC added.
However, the biggest factor affecting the demand according to it is the continued push towards accountability that the government has prescribed for the industry.
The rise in price of gold also saw a significant increase in recycling activity in the domestic market as Indian consumers especially in the rural areas opted to cash in.
Total gold recycled in India in Q3 2016 was up by 114 per cent at 39 tonnes, its highest level since the last quarter of 2012.
This boost to local supply enabled some jewellers to reduce their reliance on fresh imports to satisfy demand.
One such example of this is Kerala-based Muthoot Pappachan Group’s Swarnavarsham Scheme. Over the past 18 months, Muthoot has reportedly collected about 200 kg of gold through its nine recycling centres.
