Gold demand rebounds in India but this time it’s not jewellery; yellow metal attracts investors

India’s gold consumer demand has seen a strong rebound in the July-September quarter, however, investment has a bigger role to play than jewellery in the increased demand. Overall gold consumer demand — including jewellery, bars and coins — witnessed a 35.8 per cent growth to 86.6 tonnes on a quarterly basis, said a report from Motilal Oswal Financial Services. While there was a modest sequential recovery of 20 per cent on-quarter in the gold jewellery demand, the demand for 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, the report added. 

Jewellery demand was more severely affected with volumes falling by 48 per cent on-year to 52.8 tonnes in the July-September quarter. The demand was impacted by recurring lockdowns, unprecedented gold prices, and inauspicious periods based on religious beliefs, the Motilal Oswal report underlined. On the brighter side, upbeat rural economy, which contributes 60 per cent of the total Indian gold demand, also pushed up bar and coin demand outside urban areas.

“We believe this rebound is indicative of jeweller confidence in the strong festive and wedding demand anticipated in 4QCY20. Titan indicated in its post-results call last week that the first 10 days of the festive season has been in positive territory,” the report highlighted. There are three major findings that the research has pointed out. It suggested that the trend indicates a sharp increase in investment demand on-year in India. Further, it found out that the jewellery demand seems to be bouncing back sequentially with organized players doing even better, and increase in net bullion imports seems to be an indication that healthy festive season demand is anticipated. 

Meanwhile, India and China have been contributing nearly 55-60 per cent of global jewellery demand and around 40-45 per cent of global bars and coins demand. While the global jewellery demand was down 28.9 per cent on-year to 333 tonnes in the quarter, there was a sharp increase in demand for bars and coins in both India and China.