Gold jewellery demand in India likely to dip in H2: World Gold Council

After rising 49 per cent year-on-year (YoY) in the quarter ended June 2022 to 140.3 tonnes, the demand for gold jewellery in India is likely to dip in the remaining part of the calendar year 2022, said the latest report by World Gold Council.

“Akshaya Tritiya coupled with traditional wedding buying spurred jewellery demand, though on a low base as the June quarter of 2021 was impacted by a devastating second wave of Covid. Total jewellery demand for the first half of 2022 (H1-2022) reached 234 tonnes, which is 6 per cent higher YoY,” said Somasundaram PR, Regional CEO, India, World Gold Council.

Uncertainty over the economic outlook, a higher import duty and the possibility of additional curbs on gold buying, even if for temporary and tactical reasons with an eye on rupee-dollar exchange rate are some of the reasons, WGC believes, that will keep jewellery demand in India in check.

“The upside potential for demand can come from expectations of a normal monsoon, higher inflation and the possibility for range-bound prices,” Somasundaram added.

Meanwhile, overall demand for gold in India in the June 2022 quarter stood at 170.7 tonnes, a YoY increase of 43 per cent. In value terms, gold demand in the recently concluded quarter came in at Rs 65,140 crore, a rise of 60 per cent compared to Rs 40,610 crore recorded in Q2-2021.

“Total jewellery demand for H1-2022 in India hit 234 tonnes, which 6 per cent higher y-o-y. Gold investment i.e., bar, and coin demand in the June 2022 quarter was at 30 tonnes – 20 per cent higher y-o-y, whereas H1-2022 demand of 72 tonnes was 11 per cent stronger y-o-y. Gold demand during this period drew support from volatility in equity markets and inflation expectations,” WGC said.

Gold prices, meanwhile, averaged $1,871 per ounce (oz) in the June 2022 quarter, up 3 per cent YoY but down 6 per cent quarter-on-quarter QoQ, pressured by rising interest rates and the rocketing value of the US dollar, WGC said.

At the global level, the demand for gold (excluding OTC) was 8 per cent lower y-o-y at 948 tonnes. Combined with Q1-2022, the total demand in the first half of 2022 came in at 2,189t, up 12 per cent y-o-y.

Global gold market in H1-2022, according to Louise Street, Senior Analyst EMEA at WGC, was supported by macroeconomic factors such as rampant inflation and geopolitical uncertainty, but it also faced headwinds from rising interest rates coupled with an almost unprecedented surge in the value of the US dollar. 

“Looking ahead, we see both threats and opportunities for gold. Safe-haven demand will likely continue to support gold investment, but further monetary tightening and continued dollar strength may pose headwinds. As many countries face economic weakness and the cost-of-living crisis continues to squeeze spending, consumer driven demand will likely soften, although there should be pockets of strength,” Street said.