In­dia’s Q3 Gold Jew­ellery De­mand Shrinks

Solitaire - - KP UPDATE -

old jew­ellery de­mand in In­dia was again soft due to higher and volatile prices of gold and gov­ern­ment reg­u­la­tion cur­tail­ing un­ac­counted in­come, ac­cord­ing to the World Gold Coun­cil’s (WGC’s) lat­est Gold De­mand Trends re­port re­leased on Novem­ber 8th. In­dian jew­ellery de­mand dropped by 28% to 154.7 tonnes in the July- Septem­ber pe­riod from 214.1 tonnes a year ear­lier.

“The per­sis­tent weak­ness in this mar­ket in re­cent quar­ters means that In­dia’s share of to­tal jew­ellery de­mand has shrunk from 28% in Q1–Q3 2015 to 24% year-to-date. In­dia has taken a smaller slice from a smaller pie,” the re­port said.

Ru­ral In­dian con­sumers were hes­i­tant, but in­di­ca­tions for this sec­tor are en­cour­ag­ing, WGC said. Al­though de­mand among the ru­ral pop­u­la­tion was softer than may have been ex­pected, given the im­proved mon­soon rain­fall this year, it was rel­a­tively re­silient com­pared with de­mand in ur­ban ar­eas. Partly, this is due to the typ­i­cally smaller trans­ac­tion size made by ru­ral con­sumers, mak­ing them less likely to meet the re­quire­ment for PAN cards, which has se­verely ham­pered ur­ban de­mand.

And signs of continued re­cov­ery in this sec­tor of the pop­u­la­tion can be gleaned from look­ing at in­di­ca­tors such as sales of trac­tors. Mahin­dra and Mahin­dra, In­dia’s lead­ing trac­tor man­u­fac­turer, re­ported a 37% in­crease in do­mes­tic trac­tor sales com­pared to Q3 2015, grow­ing by a whop­ping 70% in Septem­ber. Ra­jesh Je­jurikar, pres­i­dent and chief ex­ec­u­tive of Mahin­dra & Mahin­dra’s farm equip­ment and two-wheeler divi­sion, said, “In Septem­ber 2016 we had a strong growth of 70% over Septem­ber 2015, with sales of 29,035 trac­tors in the do­mes­tic mar­ket. We ex­pect the good mo­men­tum to con­tinue with the up­com­ing fes­tive sea­son and the ef­fect of a good mon­soon.”

The mon­soon rains were well dis­trib­uted and about 85% of the coun­try’s ge­o­graph­i­cal area re­ceived nor­mal or ex­cess rains this year. Es­ti­mates are for a 7-8% in­crease in kharif food­grain out­put in 2016, which will gen­er­ate ad­di­tional in­come for the ru­ral sec­tor to di­vert to gold in the com­ing quar­ters, WGC noted.

Sub­dued global de­mand

World­wide gold jew­ellery de­mand in Q3 fell 21% year-on-year to 493.1 tonnes. This was the largest de­cline since Q2 2014 and the low­est third quar­ter for jew­ellery de­mand since 2011 – a time when av­er­age gold prices were some 28% higher than re­cent lev­els. Year-to-date jew­ellery de­mand is 18% down on last year: 1,423.6 tonnes ver­sus 1,732.7 tonnes – the low­est Q1-Q3 to­tal since 2009.

WGC said high prices were the key rea­son for continued weak­ness in the jew­ellery sec­tor, which has been se­verely de­pressed through­out 2016 so far. “Bar­ring just three or four very mi­nor ex­cep­tions, jew­ellery de­mand fell in ev­ery con­sumer mar­ket that we track.”

In China, on­go­ing eco­nomic un­cer­tainty con­trib­uted to a soft­en­ing in sen­ti­ment to­wards the pre­cious metal, which was mag­ni­fied by high gold prices and chang­ing con­sumer be­hav­iour.

“Look­ing ahead, the fourth quar­ter – hav­ing started on a stronger foot­ing – should see a re­cov­ery in the jew­ellery sec­tor. The October drop in the gold price was for­tu­itously timed. The ap­proach of key buy­ing oc­ca­sions, such as: the fes­ti­val and wed­ding sea­son in In­dia; the main hol­i­day sea­son in West­ern mar­kets; and Chi­nese New Year, make con­sumers in these mar­kets more alert to lower prices.

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