Covid-19, high prices take sheen off gold

Hyderabad: The adverse impact caused by Covid-19 coupled with high prices dampened the demand for the yellow metal in India, observes World Gold Council (WGC). As a result, the demand for gold in India fell 30 per cent during July-September quarter to 86.6 tonnes, while the overall demand stood at 123.9 tonnes, according to WGC's Q3 Gold Demand Trends report.

In terms of value, gold demand declined by four per cent during the quarter under review at Rs 39, 510 crore compared to Rs 41,300 crore in the same quarter of 2019. India's Q3 2020 gold demand fell by 30 per cent to 86.6 tonnes on the back of Covid-19 related disruptions, bleak consumer sentiment and high prices accompanied by volatility.

"However, higher than Q2, which at 64 tonnes was a 70 per cent drop and the second lowest in our quarterly series. This has been partially due to easing of lock down and some low prices in August that provided a small window of buying opportunities for the discerning," says Somasundaram PR, managing director, WGC India.

The total jewellery demand in India declined by 48 per cent to 52.8 tonnes when compared to 101.6 tonnes in the same quarter last year. Similarly, in terms of value, jewellery demand fell 29 per cent to Rs 24,100 crore from Rs 33,850 crore in July-September 2019. However, total investment demand during the third quarter surged by 52 per cent to 33.8 tonnes compared to 22.3 tonnes in the same period of 2019. Similarly, in value terms, gold Investment demand was Rs 15,410 crore, up by 107 per cent from Rs 7,450 crore in the corresponding period of 2019. "The third quarter tends to be relatively low generally due to seasonal factors like monsoons and inauspicious periods like Pitru-Paksh and Adhik Maas. Jewellery demand fell by 48 per cent as jewellery purchases did not have any support of festivals or weddings," Somasundaram added.

Moreover, he pointed out that buying jewellery in the country is an experience and the restrictions including social distancing, wearing masks have kept consumer footfalls to the retail stores low.

On the other hand, he said gold's safe haven attributes and an anticipation of price rise paved the way for an increase in investment demand for gold bars and coins by 51 per cent to 33.8 tonnes, he said.