Gold demand rose by 2 per cent as investment surge: WGC

Jenna Warner
February 5, 2017

"This was not unique to gold, but trade practices and embedded buying behaviour created short-term headwinds", he added. N Ananthapadmanabhan, MD, NAC Jewellers, said, "The October-December quarter, which traditionally sees demand during Diwali, wedding seasons and NRI purchases during December ( margazhi), saw business as usual only during October Overall, there was a 15% reduction".

Despite the possibility of regulatory issues stifling or disrupting demand from time to time, the council said in a separate report last month that India's jewellery gold demand outlook remained robust and may climb to 850 to 950 tonnes by 2020 on the back of rising income, compared to 514 tonnes past year and 662 tonnes in 2015. The government's budget is due to be released this week, and while there is conjecture that the Finance Ministry could cut the 10% gold-import tariff, HSBC analysts say they have low expectations for such a reduction.

His growth-boosting rhetoric raised expectations of a USA interest rate rise and pushed the greenback higher, prompting profit-taking and a sharp correction in the gold price.

Still, combined bar and coin demand was "exceptionally soft" until the fourth quarter, falling about 2 percent to 1,029.2 tons for the whole year.

But this was more than offset by a whopping 70 per cent surge in investment demand, as inflows into gold-backed exchange traded funds reached their highest level since the global financial crisis in 2009, driven by uncertainties around interest rates and politics in the U.S. and Europe. At a total of more than 383 tonnes it was the lowest since 2010. Geopolitical issues have driven continued inflows into gold-backed ETFs. "The Indian market faces a challenging time in 2017".

Rising prices for much of the year, regulatory and fiscal hurdles in India and China's softening economy were key reasons for weakness in the sector (gold jewellery demand). The announcement on November 8 caught the market offguard.

However higher ETF flows were somewhat offset by lower central bank purchases and declines in jewelry.

Buying in 2016 was led by the central banks of Russia, China and Kazakhstan. 2016 was the 7th consecutive year of net purchases.

Total consumer demand for FY 2016 fell by 11 per cent to 3,071 tonnes, from 3,436 tonnes in 2015. In the United Kingdom, the tentative gains made since 2012 came to a halt.

Other reports by Insurance News

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