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Expect a 10 per cent rise in gold demand this wedding season |
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KOLKATA: Gold demand in the country is expected to rise up to 10% this wedding season, which kicks off this week and continues till early June compared to a year-ago period, helped by a significant fall in its prices, trade insiders say. Bachhraj Bamalwa, director at All India Gem & Jewellery Trade Federation, said the industry expects gold demand in the jewellery segment to rise 5-10% over last year. "Price fall will definitely be a driver for jewellery sales," he told ET.
Prices of the yellow metal fell by Rs 1,000 per 10 gm in the past one week to around Rs 26,400 on March 9. Jewellers feel Indian consumers have become resilient to high import duty regime and are no longer waiting for a cut in duties.
Jewellers started restocking for the wedding season after a fall in imports in February as the trade was expecting a drop in import duty from 10% to at least 4% in the Union Budget. The trade now expects this pent-up demand to be unleashed as consumers no longer expect a reduction in the import duty soon.
Though figures are yet to be announced, trade estimates gold imports of 40 tonne in February, down from around 60 tonne in January.
Strict import curbs and high duties brought down India's gold demand by 13.5% in 2014 to 842.7 tonne as gold investment demand plunged by more than half, according to the World Gold Council. Gold jewellery demand in the country rose 8% last year to 662 tonne from 612.7 tonne in 2013. Investment demand, however, slumped to 180.6 tonne from 362.1 tonne during the same period, in sharp contrast to the global trend of 2% overall growth. Bamalwa of All India Gem & Jewellery Trade Federation said the investment demand will remain less as internationally gold prices have fallen.
On Monday, though, gold edged up in global markets, but it remained near a three-month low as the US dollar hit an 11-year high after strong US jobs report boosted expectations that the Federal Reserve would soon increase interest rates.
Somasundaram PR, MD (India) at World Gold Council, said the fundamental driver of gold demand in India is the cultural affinity towards gold coupled with a rich native wisdom about the economics of gold in a household portfolio.
Social changes and new asset classes have fundamentally reinforced the role of gold as an essential diversifier and as a long-term hedge against inflation. "Demand of this nature cannot be reshaped by supply curbs and higher taxes," he said.
"While India can't increase its local supply through mining, it certainly has the ability to increase supply through recycling," said Somasundaram. "Currently only 0.5% of total stocks are recycled in India, but the recent policy announcement introducing a standard India gold coin, bonds and a new monetisation scheme rightly seek to address varied consumer preferences linked to gold, which are also likely to impact recycling," he said.
Source : economictimes.indiatimes.com
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