Demand for gold in India crashed 7% from the year ago period, to fall to three year lows as retail sales slip on record-high prices, said the World Gold Council. The demand for gold jewellery fell a notable 8% to 128.6t, while investment in gold fell 3%. The rupee gold prices touched fresh records, which affected affordability and dampened consumer sentiment. However, the trend in India is contradictory to the global demand for the yellow metal, which jumped 7% (including OTC), which pointed to a strong global market.
Gold Demand in India
The ban in Rs 2,000 notes had a knee-jerk effect on gold demand. Indian consumers are extremely sensitive to changes in policy, as highlighted by the short-term spike in demand. However, for the larger picture, while consumer adaptability and a supportive economic backdrop bolstered the resilience in the market, high prices and inflation still dragged. For the second half of the year, World Gold Council’s Regional CEO, India, Somasundaram PR said, “we remain cautious about gold demand as it faces uncertainties due to elevated local prices and slowdown in discretionary spending. However, the success of the monsoon season could bolster sentiment ahead of Diwali season and throw positive surprises.” With H1 2023 demand at 271t, WGC estimated that for the full year, the demand for gold could be within the range of 650-750 tonnes.
However, when considering OTC as well,the total global demand demonstrated resilience, strengthening by 7% to reach 1,255t during Q2. The WGC reveals that central bank demand in the second quarter dropped by 103t on-year, primarily due to net sales in Turkey, which were influenced by country-specific political and economic circumstances.
On the positive side, central banks managed to acquire a record amount of 387 tonnes in the first half of the year, and the quarterly demand aligns with the longer-term positive trend. This suggests that official sector buying is likely to remain robust throughout the year, according to the WGC.
“Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status. In this scenario, gold would be supported by demand from investors and central banks, helping to offset any weakness in jewellery and technology demand triggered by a squeeze on consumer spending,” said Louise Street, Senior Markets Analyst, World Gold Council.