India's Q1 gold demand up 37 pc at 140 tonnes: WGC

Demand for gold in India bounced back during the January to March period to clock a growth of 37 per cent at 140 tonnes compared to the same quarter of 2020, the World Gold Council (WGC) said on Thursday.

The gold demand value in Q1 2021 was Rs 58,800 crore, marking an increase of 57 per cent in comparison with Rs 37,580 crore year-on-year.

Somasundaram P R, Managing Director for India at World Gold Council, said India's Q1 2021 gold demand rose 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 prices, buoying consumer sentiment following sharp pick-up in economic activity and return of social activities like weddings supported a 39 per cent growth y-o-y in gold jewellery demand at 102.5 tonnes.

The average domestic gold price of Rs 47,131 per10 gm was 14 per cent higher y-o-y but 6 per cent lower q-o-q -- and significantly 16 per cent lower than the August 2020 peak Rs 56,000 per 10 gm.

The slide in prices below Rs 50K per 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.

WGC said bar and coin demand grew 34 per cent y-o-y to 37.5 tonnes -- the strongest first quarter in India since 2015. Investment benefited from factors similar to those 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 301 tonnes.

Robust consumer demand combined with stock building among the trade ahead of key festivals (including Akshaya Tritiya in May) were primary drivers of the strong rise in imports. Meanwhile recycling fell by 20 per cent to a mere 14.8 tonnes in the first quarter.

WGC said 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," said WGC.

( With inputs from ANI )