India’s gold demand declined by 28 per cent to 194.8 tonnes in the third quarter this year mainly due to higher prices, not so recovered rural wallet and regulatory changes, World Gold Council’s said in its latest report.

The overall demand stood at 271.1 tonnes during the third quarter of 2015, according to the WGC’s latest ‘Q3 2016 Gold Demand Trends’ report.
“The growth in demand during Q3 of 2015 was one of the highest and was unprecedented as the price had dropped to Rs 25,586 per 10 grams,” WGC MD, India, Somasundaram PR told PTI here.

In value terms, gold demand dropped 12 per cent to Rs 55,970 crore in July-September quarter from Rs 63,660 crore in the same period last year.

Although demand among the rural population was softer than expected, given the improved monsoon rainfall this year, it was relatively resilient compared to the demand in urban areas, it said.

“While an elevated price level has been an obvious factor for the drop in volume, other issues appear to have had an impact on demand – like the trade strike following the introduction of excise duty, the regulation on PAN card for purchases above Rs 2 lakh and the subdued sentiment on gold buying when the income disclosure scheme was running,” Somasundaram said.

Besides, unusual discounts on prices in the unorganised bullion segments caused further disruption to official trade channels, he added.

He said good monsoon and a drop in the price ahead of Diwali augur well for strong seasonal demand in Q4 that will likely restore the demand trajectory to normal levels.

“Further, as tax compliance moves under the GST framework with a more reasonable duty and tax on gold, we can expect growth in organised trade activity. As global factors are supportive of gold, consumer acceptance of the price levels will further sustain demand,” he said.

The demand for the full year is expected to be in the range of 650-750 tonnes, he further said.
Overall jewellery demand for the third quarter in 2016 was

down by 28 per cent to 154.7 tonnes compared to 214.1 tonnes in Q3 2015, the WGC report said.

In value terms, jewellery demand dropped 12 per cent to Rs 44,450 crore from Rs 50,270 crore in Q3 2015.

Looking ahead, the report said Q4, having started on a stronger footing, should see a recovery in jewellery sector.

“The October drop in the gold price was fortuitously timed. The approach of key buying occasions, like the festival and wedding season in India will make consumers more alert to lower prices,” it added.

Meanwhile, total investment demand for Q3 2016 was down by 30 per cent at 40.1 tonne against 57 tonne in the same period last year.

In value terms, gold investment demand dropped 14 per cent to Rs 11,520 crore from Rs 13,390 crore in the third quarter last year.

Total gold recycled in India in Q3 2016 was up by 114 per cent to 39 tonnes compared to 18.2 tonne in the corresponding period of 2015.

According to report, Indian consumers, particularly in rural areas, opted to cash-in, swelling the supply of recycled gold to 39t, its highest level since Q4 2012.

This boost to local supply enabled some jewellers to reduce their reliance on fresh imports to satisfy demand, it added.