MUMBAI: The sharp increase in the prices of gold and a month-long strike by jewellers following the re-introduction of an excise duty led to a 39 per cent drop in gold consumption in India during the fourth quarter of fiscal 2015-16. The demand trend report released by the World Gold Council (WGC) showed that the demand for gold jewellery fell 41 per cent to 88.4 tonnes in Q1 2016 while total investment demand (gold bars and coins) dropped 31 per cent to 28 tonnes.
According to WGC, India’s jewellery market virtually grounded to a halt in March as a combination of surging prices and industrial action in protest at government policy made for an extremely challenging quarter. In mid-January, the local gold price breached the key level of Rs 26,000 per 10 grams, which further rose to Rs 28,000 per 10 grams by February 10, 2016 before getting close to Rs 30,000 per 10 grams by the end of the quarter. “This sent a strong signal to Indian consumers to hold off on buying gold jewellery until prices stabilised,” WGC said.
However, it added that the pro-rural budget and an above average monsoon are likely to support rural incomes that would positively impact gold demand. “Our forecast of India’s full year demand is in the range of 850 and 950 tonnes,” said Somasundaram PR, MD, India, WGC.
