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Indian Gold Jewellery Demand Likely to Face Headwinds

The gold jewellery demand in India is likely to face headwinds during Diwali, said P.R. Somasundaram, MD-India, World Gold Council (WGC) while sharing his outlook on gold and recent trends in the commodities market.

According to him, demand for gold has taken a backseat, mainly on account of high gold prices. The domestic gold prices in India have recorded 20% gains over a short period of nearly 30 to 40 days to hit all-time highs, thus forcing customers to postpone their gold purchases. The higher import duty on gold, uncertain monsoon, slowdown in economic growth and high volatility in prices has contributed to lack in demand for gold and jewellery.

At the current high price level, gold jewellery demand is likely to witness notable slowdown during Diwali this year.

The WGC anticipates drop in official gold imports by the country in the short term, mainly due to two factors. Firstly, the supply of old gold has been witnessing dramatic jump following recent run up in gold prices. The lack of demand among consumers may also tend to keep imports at subdued levels.

The jewelers expect annual gold sales in the country to hit the lowest level in three years. The full-year gold demand is likely to plunge to low levels of 666 tons recorded in 2016. A recovery in gold demand is possible only if the gold prices settle down, said N. Anantha Padmanaban, chairman of the All India Gem & Jewellery Domestic Council.