High prices crash India gold demand 17% in Q1

Demand for gold in India fell by 17% in the first quarter of 2023 to 112.5 tonnes compared to the 135.5 tonnes in the first quarter of 2022, mainly due to high prices of the yellow metal and market volatility. However, in value terms, gold demand was down only 9%, to ₹56,220 crore for Q1 2023, compared to ₹61,540 crore in the corresponding quarter of last year, says World Gold Council (WGC). Currently, gold prices in India are hovering around a record ₹60,000 for 10 grammes when compared to ₹52,000 last year.

Total Jewellery demand in India for Q1 2023 decreased by 17% at 78 tonnes as compared to 94.2 tonnes in Q1 2022. Valuewise, jewellery demand was ₹39,000 crore, down by 9% from ₹42,800 crore in Q1 2022. Total Investment demand for Q1 2023 at 34.4 tonnes also decreased by 17% in comparison to Q1 2022 (41.3 tonnes). In value terms, gold Investment demand in Q1 2023 was ₹17,200 crore, down by 8%. There was a sharp jump in recycling, up by 25% to 34.8 tonnes in comparison to 27.8 tonnes in Q1 2022.

"Since 2010, barring the pandemic gap, this is the fourth time that Q1 gold jewellery demand fell below 100 tonnes. Sharp rise in gold prices and volatility combined with fewer auspicious days to trigger consumption, has led to many households deferring buying perhaps in anticipation of a downward price correction", says Somasundaram PR, Regional CEO, India, World Gold Council. Unlike in previous years, buyers did not show much enthusiasm in gold buying during the recent 'Akshya Tritiya, he says.

Global factors, primarily US interest rate hikes, pushing up dollar prices, coupled with rupee depreciation, kept gold prices above ₹60,000/10g, nearly 19% jump over last year. Discussions with trade indicate that purchases are through recycling old gold jewellery and lower unit purchases, latter reflecting in higher volumes on digital gold platforms that enable micro savings in gold.

WGC says current trends point to less than 800 tonnes of demand for 2023, as in the past year. "The outlook for gold purchases is highly dependent on rupee prices, which show no sign of abating, and which will act as a deterrent, and of course monsoons, though Q4 as always, could throw a surprise,” says Somasundaram.

Gold demand globally was 13% lower at 1,081 tonnes, in comparison to Q1 of 2022. Global jewellery was relatively flat in the first quarter at 478 tonnes. Inclusive of over-the-counter (OTC) sales, total gold demand strengthened 1% y/y to 1,174tChinese demand regained ground, reaching 198 tonnes in its first quarter of unfettered consumer activity since lockdown restrictions were lifted. Demand from central banks experienced significant growth during the quarter, adding 228 tonnes to global reserves.