India’s gold demand dips by 40.5%, world down 14 per cent

The yellow metal is losing lustre in its largest market in the world. Rising prices, weak rural income due to poor monsoon and a less buoyant economy continued to hurt gold demand in India during the second quarter of 2002 (April-May-June) and it declined a whopping 40.5 per cent to 126.9 tonnes from 213.1 a year earlier.

But analysts said the dip was not totally unexpected. “With the exception of the decline in investment demand, these numbers should not come as a major surprise to gold market professionals as Indian demand in particular has been hit by the higher spot gold price and concerns about a weak harvest,” said John Reade, metals analyst at UBS Warburg. Official gold imports into India slumped in June to one of their lowest levels since liberalisation at the end of 1997, World Gold Council said in its ‘Gold Demand Trends’ report for the period. A sharp fall in demand in India, a market particularly sensitive to price volatility, accounted for much of the decline in total global demand which was 14 per cent below what it was a year earlier. While the prospect of price rises and geopoilitical situation were favourable to investment, the rise in price also encouraged dishoarding. During the first two months of the quarter, the consumer demand recovered to some extent it said.

Global Demand Falls: Total demand for gold in jewellry, investment, industrial and dental applications fell to 729 tonnes in the April-June quarter, a 14.3 per cent fall year-on-year, WGC said. Around 80 per cent of demand is accounted for by jewellry, but consumer confidence has been knocked by a downturn in stock markets and the attacks in New York and Washington.