Jewellery demand is now back to pre-pandemic levels: World Gold Council

• Demand for gold in India during the September quarter of the current calendar year grew by 14% year-on-year.
  
• The healthy demand for jewellery in India can be attributed to a sharp pick-up in economic activity, with a 17% year-on-year increase in tonnage terms.
  
• Recovery in gold jewellery demand was primarily driven by urban India, more specifically southern parts of the country.
  

India’s love for gold continues to remain strong, with both jewellery and investment demand growing in double digit in the September quarter of this year. According to the World Gold Council’s quarterly report, demand for the yellow metal in India during the September quarter of the current calendar year grew by 14% year-on-year at 191.7 tonnes. In value terms, gold demand was ₹85,010 crore, up by 19% as compared to the corresponding quarter last year.

For the full year, the World Gold Council expects demand for the yellow metal to average around 750-800 tonnes, which is similar to last year.

The demand for gold continues to remain strong from central banks despite the drop in prices through 2022, as the dollar strengthened against all other currencies. The strength of the dollar has impacted values of asset classes and gold is just one of them. In India, the demand for ornaments has made a strong comeback this year after weakness in demand post-Covid.

According to Somasundaram P R, regional CEO- India, World Gold Council: “India's total gold demand in Q3 2022 at 191.7 tonnes is a 14% increase over last year. This reflects better-than-expected performance and strong consumer interest, helping year-to-date demand return to pre-Covid levels.”

Recovery in gold jewellery demand was primarily driven by urban India, more specifically southern parts of the country. The healthy demand for jewellery can be attributed to a sharp pick-up in economic activity, with a 17% year-on-year increase in tonnage terms. Rural India which is a big consumer of gold, however, has not played a part in demand recovery thanks to the seasonal effect (monsoons) and inflation.

Gold bars and coins also were in demand during this period and grew by saw a 6% year-on-year improvement to 45.4 tonnes, as retail investors responded to gold price drop and weaker equity markets, and festivities around Ganpati and Puja festivals after two years of Covid, saw a huge uplift in consumer sentiment, says World Gold Council’s report.

In India, total Investment demand during the September quarter was 45.4 tonnes, an increase of 6% in comparison to the corresponding quarter last year. In value terms, gold Investment demand in the September quarter was ₹20,150 crore, up by 10% from the previous year. Total gold recycled in India in Q3 2022 was 16 tonnes, down by 23% compared to 20.7 tonnes in 2021.

Global trends in gold consumption

Globally too the demand for gold as a store of value improved, but investors of gold exchange traded funds (ETFs) turned cautious. According to the World Gold Council report, retail investors bought gold as a store of value amid surging global inflation, while ETF investors reduced their holdings in the face of rising global interest rates.

Demand for gold was also seen in the Middle East, with Saudi Arabian jewellery consumption rising by 20% since Q3 2021, and the United Arab Emirates up 30% for the same period.

Chinese jewellery demand also saw a modest 5% increase y-o-y driven by improved consumer confidence and a dip in the local gold price, prompting the release of some pent-up demand.

Central bank buying too picked up during the quarter with estimated record purchases of nearly 400 tonnes in the third quarter.

“Looking ahead, we anticipate central bank buying and retail investment to remain strong and that could help offset potential declines in OTC and ETF investment that may prevail if the dollar strength persists. We also expect to see jewellery demand continue to perform strongly in some regions such as India and Southeast Asia, while the technology sector will likely witness further decline in the face of economic deceleration,” Louise Street, Senior Markets Analyst at the World Gold Council said.

Gold continued to hold favour with retail investors who turned to gold for its status as a store of value against inflation and geopolitical uncertainty.

Investors sought to hedge inflation with bar and coin investment, driving total retail demand up 36% y-o-y. This was supported by significant purchasing in Turkey (up 5x) and in Germany (up 25%). There were ‘visible contributions’ across all major markets, as per World Gold Council estimates.

Mine production too was up 2% versus Q3 2021, with gold mining seeing its sixth consecutive quarter of growth. By contrast, recycling was 6% lower y-o-y in Q3, as consumers held onto their gold in the face of surging inflation and an uncertain economic outlook.

“Despite a shaky macroeconomic environment, demand this year has reflected gold’s status as a safe haven asset, underscored by the fact that it has outperformed most asset classes in 2022,” said Louise Street.

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