Gold demand in India drops 39%, Import curbs likely to stay until Q1 2015

Author: Paul Ploumis14 Aug 2014 Last updated at 08:16:49 GMT

NEW DELHI (Scrap Monster): The gold demand in India during second quarter of the year dropped by 39% to 204.10 tonne when compared with the corresponding quarter last year, according to the latest report published by the World Gold Council (WGC). However, WGC notes that the government is unlikely to withdraw the restrictions on gold imports before Q1 2015.

According to the WGC Q2 Demand Trends report, the country’s gold demand value during Q2 this year fell by over 40% to Rs 50,564.30 crores, when compared with Rs 85,533.80 crores during the same quarter in 2013. The gold demand in the country was dented by uncertainty caused by the election and consumer expectations for further drop in gold prices.

However, P R Somasundaram, Managing Director, WGC-India noted that considering the average demand during the past five years, the Q2 2014 demand looks robust. The figure of 204.10 tonne cannot be considered trivial, especially at a time when tight restrictions were in place during the whole quarter.

WGC further notes that the Indian gold demand in 2014 will fall below last year’s levels. Even though, the demand is likely to pick up during H2 2014, WGC has slashed the annual gold demand forecast by 50 tonnes from its earlier forecast. The Indian gold demand in 2014 will be 850-900 tonnes, the world body observed.

The mere fact that the country is still struggling with high trade deficit wipes out any possibility of gold import duty cut. Any relaxation on gold curbs could result in high interest scenario and higher oil prices. Given all the facts, the gold import restrictions are unlikely to be relaxed before Q1 2015, noted WGC.