High prices lead to gold demand falling 17% in Jan-March quarter

A salesperson shows gold bangles to a customer at a jewellery showroom in Mumbai.
| Photo Credit: Reuters

With high prices the demand for gold in India for Q1 2023 (January to March) shrunk by 17% to 112.5 tonnes as compared to overall demand of 135.5 tonnes in the year-ago period, according to the World Gold Council (WGC).

India’s gold demand value during the quarter was ₹56,220 crore, down by 9% as compared to ₹61,540 crore in the year-ago period.

Total Jewellery demand in India for Q1 2023, as per data released by WGC, decreased by 17% to 78 tonnes as compared 94.2 tonnes a year ago.

Total Investment demand for the quarter at 34.4 tonnes decreased by 17% year-over-year (YoY). In value terms, gold investment demand in the quarter was ₹17,200 crore, down 8% YoY.

Total gold recycled in India in the quarter was 34.8 tonnes, up by 25% compared to 27.8 tonnes in the same period last year. Total net bullion imports in the quarter stood at 134 tonnes, similar to the volume in the year-ago period. 

“Record high and volatile gold prices impacted sentiment and gold jewellery demand dropped to 78 tonnes with little support from the investment side,” Somasundaram PR, Regional CEO, India, World Gold Council said. He said on Thursday the retail price of gold per 10 grams including taxes was ₹64,500, which is a lifetime high.  

Since 2010, barring the pandemic gap, this is the fourth time that gold jewellery demand in January-March period fell below 100 tonnes.

“Sharp rise in gold prices and volatility combined with fewer auspicious days to trigger consumption, has led to many households deferring buying perhaps in anticipation of a downward price correction,” he added.

“Our forecast for the gold demand is muted for 2023 even as the economic momentum in India remains healthy and the RBI rate hike cycle has paused,” he said.

“The outlook for gold purchases is highly dependent on rupee prices, which show no sign of abating, and which will act as a deterrent, and of course monsoons, though the October-December quarter as always, could throw a surprise. We believe current trends point to less than 800 tonnes of demand for 2023,” he further said.

Globally while gold demand (excluding OTC) was 13% lower YoY, a recovery in the OTC market propped up total gold demand to 1,174 tonnes, a slight 1% increase compared to the year-ago period.

“Central banks helped boost demand adding 228 tonnes to global reserves. Sustained and significant purchases from the official sector underscore gold’s role in international reserve portfolios during times of market volatility and heightened risk,” the WGC said.