NEW DELHI (Commoditiescontrol) - India's gold demand grew by 9.1 percent to 727 tonnes in 2017 due to low prices coinciding with Dhanteras, positive economic backdrop and improved consumer sentiment especially in rural areas, according to a World Gold Council (WGC) report.
The total demand stood at 666.1 tonnes in 2016, WGC said in its latest Gold Demand Trends report.
"The demand was mainly driven by jewellery, which grew as GST stabilised, stock markets performed well and GDP growth leading to better economy and consumer sentiment, particularly in the rural areas, as the effect of demonetisation wore off," WGC Managing Director, India, Somasundaram PR said.
In July, the GST on gold was raised to 3 percent from 1.2 percent. Also, the government's decision to remove anti-money laundering regulation, the Prevention of Money Laundering Act (PMLA), from jewellery helped boost demand.
The growth was mainly driven by jewellery demand in 2017, which was up by 12 percent at 562.7 tonnes compared to 504.5 tonnes in 2016. In value terms jewellery demand was up 9 percent at Rs 1,48,100 crore, from Rs 1,36,290 crore in 2016.
Total investment demand was down 2 percent at 164.2 tonnes in 2017 compared to 161.6 tonnes in 2016. In value terms, gold investment demand fell by 1 percent at Rs 43,220 crore, from Rs 43,650 crore in 2016.
Total gold recycled in India was 88.4 tonnes compared to 79.5 tonnes in 2016.
Somasundaram said in next two years the growth percentage of coins is expected to be the fastest in India as the base is low.
Talking about net import, he said, in 2017 it grew by 59 percent to 888 tonnes compared to 558 tonnes in 2016.
For the last quarter of 2017, demand for gold was up 2 percent at 249.3 tonnes compared to 244 tonnes in 2016.
In value terms, gold demand during the fourth quarter went up by 3 percent to Rs 66,220 crore against Rs 64,530 crore in the year-ago quarter.
Total jewellery demand was up by 4 percent at 189.6 tonne against 182.2 tonne in the fourth quarter of 2016. Value wise jewellery demand was Rs 50,370 crore, a rise of 5 per centfrom Rs 48,190 crore the last quarter of 2016.
Total investment demand for the fourth quarter witnessed a decline of 3 per cent at 59.6 tonne compared with 61.8 tonne in the same period of the previous year. In value terms, gold investment demand was Rs 15,850 crore, a drop of 3 per cent from Rs 16,340 crore in Q4 2016.
Total gold recycled in India in the last quarter of 2017 was 17.6 tonnes compared to 16 tonnes in the same period of 2016.
India's Demand in 2018
Looking ahead, he said, 2018 Budget confirmed various positive initiatives for gold including the development of a comprehensive policy and the creation of a gold exchange.
Gold demand in India is likely to remain below its 10-year average for a third year in 2018 as higher taxes and new transparency rules on purchases may cap last year`s rebound in buying.
Gold consumption in 2018 will likely be between 700 and 800 tonnes versus 727 tonnes last year, Somasundaram PR said. Indian demand averaged 840 tonnes over the last 10 years.
Global Demand
A late rally in physical gold buying failed to prevent a drop in full-year demand last year to its lowest since 2009, the World Gold Council said, as weaker fund investment outstripped a bump in jewellery consumption.
Global gold demand slid 7 percent in 2017 to 4,071.7 tonnes, an eight-year low, the WGC said in it latest quarterly demand trends report.
Investment demand fell by nearly a quarter, driven by reduced inflows into bullion-backed exchange traded funds, the gold mining industry-funded WGC said. While gold prices rose last year on the back of dollar weakness, rising interest rates and a surge in stock markets detracted from the metal`s appeal as an investment.
"Certainly the higher equities and rising interest rates will have prompted some investors to think about their allocation to gold (last year)," the WGC`s head of market intelligence Alistair Hewitt said. "That said, lots of investors are concerned about frothy asset prices."
With monetary policy still loose in Europe, 73 percent of new gold ETF investment last year flowed into European funds, he said. "In Europe, you still had negative interest rates and negative yields," he said. "You can contrast that with the United States, where you had three rate hikes."
Optimism over global growth, which helped drive the rise in equities last year, also fed into stronger jewellery consumption, he said. Jewellery demand saw its first annual rise since 2013 despite a 13 percent increase in gold prices.
Indian jewellery demand, which saw particular weakness in 2016, rose 12 percent, posting its strongest fourth quarter since the WGC started compiling data in 2000. In China, jewellery demand rose 3 percent last year, its first annual increase since 2013.
Total Chinese buying stood at 953.3 tonnes last year, while Indian demand reached 726.9 tonnes, the WGC said. It expects to see buying at similar levels this year, with Indian demand seen at 700-800 tonnes, and Chinese offtake at 900-1,000 tonnes.
Central banks also trimmed their overall purchases for a fourth straight year. A drop in demand in the fourth quarter was due entirely to Venezuela`s $1.7 billion swap deal with Deutsche Bank elapsing in October, the WGC said.
This represents 45 tonnes of gold, it said, and was accounted for in the fourth-quarter figures as a sale.
Demand from Russia and Kazakhstan stayed buoyant, while the market also saw a rise in demand from Turkey. China, a strong official sector buyer in recent years, was absent from the market in 2017.
This year central bank demand is expected to hold at 300-400 tonnes, little changed from 2017 levels, Hewitt said.
Source: Agencies