Softer price, festivals push gold demand in July-Sept: WGC

The demand of gold in India increased 10% in the third quarter of the current calendar year, according to the World Gold Council (WGC).

The demand for gold increased due to softening of prices and festive demand. India is the second largest consumer of gold in the world.

WGC Regional Chief Executive Officer (India) Somasundaram P.R. said gold prices softened a bit in the last quarter but now they have started rising. Dhanteras and the wedding season will impact prices in the next two months.

Dhanteras is considered the most auspicious day in the Hindu calendar for buying items ranging from precious metals to utensils, to other valuables.

Releasing the quarterly report on gold demand, the WGC said India’s gold demand rose to 210.2 tonnes in the third quarter from 191.7 tonnes in the same period a year ago.

According to the report, demand for jewellery increased by seven per cent from 146.2 tonnes to 155.7 tonnes in the quarter under review, while demand for gold bars and coins increased by 20 per cent from 45.4 tonnes to 54.5 tonnes.

India’s gold imports rose to 220 tonnes in the third quarter from 184.5 tonnes in the year-ago period.

Somasundaram said the demand for gold in the fourth quarter is expected to be similar to the third quarter. It will be slightly better if prices do not increase further.

At the same time, global gold demand declined by six percent to 1,147.5 tonnes in the third quarter of 2023.

Trade feedback is that consumers have accepted the Rs 60,000 per ten-gram price point, so a downward correction could trigger a significant jump in demand.

Festive purchases helped South India outperform other regions. By contrast, North India was the weakest and saw a year-on-year decline, partly reflecting a weaker rural sector and a relative lack of major festivals during the quarter.
Lower-carat (18K and 14K) jewellery has gained popularity amid elevated gold prices and has benefited from retailers promoting these higher-margin products.
On a relative basis, large retailers have continued to perform well, reaping rewards from their aggressive marketing campaigns, the report said.
“In the last quarter, as prices softened a bit, more people were waiting to buy gold and bought more bars and coins instead of jewellery. Therefore there was a 20 per cent jump in demand for bars and coins in Q3,” Somasundaram said.
Price correction was a major factor that triggered the latent demand which the WGC believes continues to be strongly underpinned by strong positive economic sentiment mixed with uncertainties arising from a variety of factors such as fear of inflation, below-normal monsoon and global developments, he said.
According to WGC, Q4 will get the usual seasonal boost due to festivals and wedding purchases, however, any sharp price rise could delay the release of pent-up demand following a relatively weak first-half demand.
“There is latent demand but prices are stiff… If prices go up, there will be a general caution in buying. People may buy more bars and coins,” Somasundaram said.