India’s Gold Consumer Demand Sees Sequential Rebound

Total gold consumer demand in India which includes jewellery, bars and coins, witnessed a 35.8% growth QoQ to 86.6 tonnes, according to a report from Motilal Oswal Financial Services. On a year-on-year basis the demand was still down 30.1%/49.2% for 3QCY20/9MCY20.

"Jewellery demand was more severely affected with volumes down 48% YoY to 52.8 tonnes in 3QCY20. The demand was impacted by (a) recurring lockdowns, (b) unprecedented gold prices, and (c) inauspicious periods based on religious beliefs. Notably, there was a modest sequential recovery of 20% QoQ in the gold jewellery demand.

While jewellery demand was muted, gold bars and coins saw a sharp surge in the quarter. With the continued momentum in gold price rise, consumers perceived gold bars and coins as a lucrative investment option. At the same time, upbeat rural economy, which contributes 60% to total Indian gold demand, also pushed up bar and coin demand outside urban areas," the Motilal Oswal report has noted.

Net bullion imports, which contribute 85-90% of India's gold supplies, saw a sharp recovery in 3QCY20 after a deep plunge in the quarter before that. According to Motilal Oswal Financial Services report, while gross imports and exports both plunged sharply in 2QCY20, the revival in exports was much lower than that in imports in 3QCY20. Accordingly, while net bullion imports had fallen 96.4% YoY to just 9t in 2QCY20 amid stringent lockdowns, the volumes saw a sharp rebound to 90.5 tonnes in 3QCY20, up 8.2%. Although the growth is on a soft base of 3QCY19, it comes after 4 consecutive quarters of decline.

Motilal Oswal Financial Services believes this rebound an indicative of jeweller confidence in the strong festive and wedding demand anticipated in 4QCY20.

Gold prices have rallied significantly over the last 1 year and despite this, jewellery sales have seen some rebound in the third quarter of the calendar year as compared to the second quarter.