India set to beat China in gold demand: WGC

KOLKATA: Gold consumption in India may go up 23% to 1,000 tonne this year if the country achieves a GDP growth of 7.5-8%, the World Gold Council indicated on Thursday .

India consumed 191.7 tonne of gold in the quarter to March, an increase of 15% over that in the year-ago period but lower than the five-year average of 233 tonne.

The demand for jewellery during the first three months of the year was 22% more than that in the year ago period, at 150.8 tonne compared to 123.5 tonne. Investment demand was, however, down 6% at 40.9 tonne, compared to 43.6 tonne in the first quarter of 2014. This was in sharp contrast to the overall global trend, which saw a 3% drop in jewellery demand and a 4% increase in investment demand.

Somasundaram PR, managing director-India at World Gold Council said that the growth in consumption compared to last year is "a reflection of the muted demand last year due to crippling gold import policies coupled with weak economic sentiment and trade uncertainty at the time of the general elections". "In contrast, following the removal of 80:20 rule and the budget announcements introducing new gold products, the environment for gold has been encouraging in the past few months, resulting in buying behaviour slow ly returning to normalcy ," he said.

A number of factors bode well for gold consumption this year, he said, pointing to an upward revision of GDP growth, the government's approach to bringing gold into the mainstream economy and ensuring that gold becomes a fungible asset.

Besides, he said, India's natural affinity with gold as a savings asset will see to it that the precious metal becomes embedded in the financial sector.

"Notwithstanding the unseasonal rains in the early part of the calendar year and the monsoon seasonal rainfall likely to be 93% of the long period average, the full year demand expectations are in the range of 9001,000 tonne," said WGC India's top executive.

The global demand for jewellery , which remains the most significant component of overall gold demand, totalled 601 tonne in the quarter to March, 3% lower than the 620 tonne in the year-ago period.

Besides India, there were pockets of strength across a number of Southeast Asian countries ­ includ ing Malaysia, Indonesia, South Korea, Thailand and Vietnam. However, this was counterbalanced by declines in Turkey , Russia and the Middle East. In China, jewellery demand dropped 10% compared to that in the year-ago period as a rising stock market diverted money into equities, but it was still up 27% against the five-year average.

Investment demand for gold rose 4% to 279 tonnes in the first three months. There were net inflows of 26 tonne into gold-backed Exchange Traded Funds (ETFs) ­ turning positive for the first time since the last quarter of 2012 as investment sentiment turned positive in the Western world.

Investment in bars and coins came under pressure in the face of buoyant stock markets, notably in India and China, and currency fluctuations in Turkey and Japan, but this was offset by strong retail investor demand in the euro zone, which rose 16%, most notably in Germany and Switzerland. Total supply remained virtually unchanged from last year at 1,089 tonne.