Gold Jewellery demand in India rocks up by 39% in 1Q 2021

Jewellery demand in value term grew up by 58%! 

Net bullion imports in India rose-up by 262% 

According to the key fact-n-figures that announced by the World Gold Council (WGC) for Gold demand full year for the period of January – March 2021, demand for gold in India for Q1 2021 was at 140 tonnes, increase by 37% as compared to overall Q1 demand for 2020 of 102 tonnes. India’s Q1 2021 gold demand value was Rs 58,800 crores, an increase of 57% in comparison with Q1 2020 of Rs 37,580 crores. 

Total Jewellery demand in India for Q1 2021 was up by 39% at 102.5 tonnes as compared to Q1 2020 had halted at 73.9 tonnes. The value of Jewellery demand was Rs 43,100 crores, a rise of 58% from Q1 2020 of Rs. 27,230 crore. 

Total Investment demand for Q1 2021 increased by 34% at 37.5 tonnes in comparison with Q1 2020 had stayed at 28.1 tonnes. In value terms, gold Investment demand was of Rs. 15,780 crores, up by 53% from Q1 2020 recorded of Rs. 10,350 crores. Total gold recycled in India in Q1 2021 was 14.8 tonnes, as compared to 18.5 tonnes in Q1 2020, a drop of 20%.

Net bullion imports in India in Q1 2021 was 301 tonnes, as compared to 83.1 tonnes in Q1 2020, an increase of 262%

Somasundaram PR, Managing Director, India, World Gold Council said, India’s Q1 2021 gold demand rose 37% to 140 tonnes on the back of covid containment and positive sentiment following start of the vaccination programme. It presented a glimpse of gold’s underlying strength of resurgence when we learn to live with a well and truly tamed covid. 

A combination of softening gold price, buoying consumer sentiment following sharp pick-up in economic activity and return of social activities like weddings supported a 39% growth y-o-y in gold jewellery demand at 102.5t. 

The average domestic gold price of INR 47,131/10gm was 14% higher y-o-y but 6% lower q-o-q - and significantly, 16% lower than the August 2020 peak INR 56,000/10gm. Slide in prices below INR 50K/10gm removed a psychological barrier for the consumers and spurred bargain buying and wedding-related accumulation, releasing pent-up demand. 

Indian retail gold investment demand also improved for a third consecutive quarter. Bar and coin demand grew 34% y-o-y to 37.5t-the strongest first quarter in India since 2015. Investment benefited from factors similar to that supporting jewellery demand: a lower domestic gold price coupled with improving economic indicators.

A reduction in customs duty on gold, together with an appreciating rupee throughout much of the quarter, helped lower INR prices and presented significant buying opportunities for retail investors. 

Small bars (of 50g and 100g denominations) were reportedly hugely popular in Q1. Official imports of gold surged during the quarter – jumping to a record high of 301t. Robust consumer demand, combined with stock building among the trade ahead of key festivals (including Akshaya Tritiya in May), were the primary drivers of the strong rise in imports. Meanwhile recycling fell by 20% to a mere 14.8 tonnes in the first quarter. 

The outlook for the coming quarter is, however, cautious. As lockdowns are re-imposed in various regions of the country in response to rising COVID-19 cases, consumer confidence has dipped. This is likely to impact wedding demand in Q2 2021. 

Digital and Omni-channel retail strategies developed over the last year by many players may cushion the drop unlike Q2 2020 but the current crisis is beyond just economics and logistics, therefore, sentiment may be affected till large scale vaccination is achieved. We are unable to quantify the impact on full year gold demand as we do not have sight of several critical factors at currently at play.