India drives gold demand single-handedly in second quarter, WGC says
Global demand for gold jewellery stood at 480.8 tonne, up 8% as against the second quarter of 2016, World Gold Council said (WGC), adding that it was India who single-handedly drove the demand for yellow metal.
WGC said, "India drove global Q2 jewellery demand growth almost single-handedly. Demand shot up to 126.7t compared with just 89.8t in Q2 2016."
The strong recovery had been widely expected after exceptional import figures were reported, hitting an all-time high of 104.6t in May as the market stockpiled gold ahead of the June GST rate announcement.
"Expecting a punitive GST rate, jewellers and consumers alike crammed their purchases into the first two months of the quarter, slowing down once the government confirmed that a 3% rate would be applied. Another brief flurry at the end of June, before the rollout of GST in July, pushed local prices to a premium of around US$3-4/oz above the international price, although some traders reported paying a premium as high as US$10/oz in some instances," WGC said.
Gold demand in India was boosted by festivals, weddings and improved rural sentiment. Akshaya Tritiya – a key gold-buying festival in the Hindu calendar – boosted gold jewellery demand in the usual way.
"But the timing of the festival this year, falling as it did over a weekend and coinciding with a dip in the gold price, proved particularly encouraging. Estimates suggest that Akshaya Tritiya-related sales were up by around 30% y-o-y," WGC said.
WGC said, "Although the 3% GST rate was lower than many in India had anticipated, we expect the new tax is likely to cause some short-term disruption as manufacturers, retailers, importers and consumers adapt to the new regime."
"As consumers and importers brought forward their purchases to Q2, demand will likely be subdued for a few weeks. Stock is plentiful across the supply chain and consumers who have recently purchased are unlikely to do so again in the short term. As the market digests this gold, and adapts to GST, we feel the market environment should become more settled towards the end of the year. This, we believe, should be helpful for gold demand – particularly as the key October festival season approaches," WGC said.