Gold price: India suffers demand shock

Retail investment, which is the sum of physical bar investment and all coins, plunged by 17% in the second half of 2019, with a year‐on‐year drop, recorded in both bar investment and coin demand. In the jewellery sector, fabrication demand declined by 17% worldwide in H2. 

Nowhere was the pullback in the retail sector more evident than in India, where imports reached only 219 tonnes during the second half of the year, a decrease of 44%.

The third quarter saw supply for domestic consumption plunge by 86% to a mere 21 tonnes. GFMS said that while Q3 is usually a quiet month because the period is not generally considered part of the wedding season and there are fewer festivals, weakness last year was “unprecedented”:

Domestic consumption in Q3 nosedived on two accounts – a rise in import duty, combined with a rise in the gold price in local currency terms.

High volatility also created confusion in the minds of the consumers.

While demand returned in November, a traditional Indian gold gift giving period, the spike in the dollar price due to the US-Iran conflict caused another drop off.

The decline in retail demand saw jewellery fabrication in the country decrease by 36% in H2, compared to the same period in 2018, to an estimated 217 tonnes.

GFMS said during its regular field research, the researcher observed that small to medium manufacturers in semi-urban areas were surviving by only making jewellery out of scrap.

Aggregators used to bring old jewellery to these manufacturers to be processed and as a result of the slowdown, many ‘Karigars’ (artisans) lost their jobs.