India's Gold demand drops 35% in 2020

Coronavirus pandemic and high prices caused gold demand to fall by 35% to 446.4 tonnes in 2020 compared to 690.4 tonnes in 2019. In value terms, the demand fell by 14% to Rs 188,280 crore during the last year, from Rs 217,770 crore a year ago.

Total gold jewellery demand in India for 2020 was also down by 42% at 315.9 tonnes as compared to 544.6 tonnes in 2019 and in value terms, jewellery demand was Rs 133,260 crores, down 22% from Rs 171,790 crore in 2019. Total investment demand for 2020 was down 11% at 130.4 tonnes in comparison to 145.8 tonnes in 2019 and in value terms, gold investment demand was Rs 55,020 crores, up 20% from 2019, said data from the World Gold Council, which tracks jewellery demand globally at the wholesale level.

"The gold demand drop was only 14% when viewed in value terms, as prices were up 34% hovering around Rs 50,000/10grams for most past of the year. In Q4 2020, the festive period and the ensuing wedding season revived hopes and drew in jewellery demand worth 137.3 tonnes-the strongest quarter in the year," said Somasundaram PR, Managing Director, India, World Gold Council. Demand for gold in India for Q4 2020 was at 186.2 tonnes down by 4% as compared to Q4 2019 (194.3 tonnes). Value wise it was Rs 82,790 crores, an increase of 26% in comparison with Q4 2019 (Rs. 65,890 crore).

According to the World Gold Council, with the implementation of mandatory hallmarking in June 2021, establishment of the international bullion exchange in GIFT city and Retail Code of conduct under the aegis of the industry steering committee, industry growth will be qualitatively superior underpinned by global ambitions and strong awareness of trust and transparency.

"From the consumers perspective, there is acceptance of current high price level as the new normal. In addition, current high stock indices and low interest rates will add significant weightage to gold amidst inevitable return of celebrations and festivities. We could see a strong spurt in gold demand for the next few years, a repeat of what happened after a sharp drop in 2009," said Somasundaram.

In such a scenario, the current high tax on gold increases the lure of smuggling, so duty cut to reasonable levels is absolutely necessary, along with tax concessions for recycling gold, innovations and digital interventions. 2021 will likely set a trend of long term growth in Indian gold demand and the benefits of such growth can be explicitly captured if coordinated policy measures are sustained, making gold a mainstream asset class, he said.

Also Read: Gold demand plunges to 11-year low in 2020 as virus upends trade, says WGC