Gold demand in India rises by 27%: WGC

Gold demand in India, the world's largest consumer, rose by 27 per cent to 256.5 tonnes in the first quarter of 2013, World Gold Council said on Thursday.

The demand for the precious metal stood at 202.1 tonnes in the same quarter last year, it said.

"Gold demand in India for both jewellery and investment continues to remain strong. The price fluctuations in gold recently have only served to reinforce Indian consumers' appetite for purchasing physical gold," WGC India Managing Director Somasundaram PR told reporters in New Delhi.

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Text: PTI and Reuters

He said gold is a time-tested asset class which has helped preserve the wealth of Indian families for generations.

"With the ongoing wedding and festive season, we believe that demand for gold will continue to remain robust," he said.

In terms of value, WGC said in its latest report that gold demand in India during January- March period of this year increased by 32 per cent to Rs 72,899.4 crore (Rs 728.99 billion) as against Rs 55,148.7 crore (Rs 551.48 billion) in the year-ago period.

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In the West, gold investment nearly halved in the first quarter as a brighter view of the US economy prompted investors to favour other assets like stocks over bullion, the World Gold Council said on Thursday.

Overall gold demand fell 13 per cent to a three-year low of 963 tonnes in the last quarter as rising jewellery demand and strong appetite for coins and bars failed to offset a sharp drop in investment, chiefly in Exchange-Traded Funds.

These investment vehicles, which issue securities backed by physical metal, have proved a popular way to gain exposure to the gold price since the start of the financial crisis, but saw record outflows in the first quarter.

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Total jewellery demand rose by 15 per cent to 159.5 tonnes from 138.3 tonnes, while investment demand increased by 52 per cent to 97 tonnes from 63.8 tonnes in the review period.

A total of 21 tonnes of gold was recycled in the January-March quarter of this year as against 25 tonnes in the same quarter of 2012, the report said.

Record Chinese demand for jewellery, coins and bars, contributing to an extra 60 tonnes of jewellery demand and 35 tonnes of bar and coin offtake worldwide still fell well short of counter-balancing a 195-tonne drop in investment.  

The fall in financial flows into the metal included a 177-tonne outflow from ETFs.

The WGC's managing director for investment, Marcus Grubb, said he expected investment levels to stabilise over the year as a whole, and for rising interest in physical gold to lead to more stable demand in the full year.

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"What you've seen is a near-term readjustment to more positive views on the US since December," he said.

"You're unlikely to see the same level of selling in the rest of the year unless you get a rampant and sustainable recovery in the US, which I don't think is on the cards.

"Meanwhile the gold heads east, because if people are selling the ETFs in the US and to some degree in Europe, consumers in India and China, and bar and coin investors around the world, are buying that gold."

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Chinese coin and bar demand hit a quarterly record of 109.5 tonnes in the first quarter, up 22 per cent.

India saw the biggest overall rise in bar and coin investment, with demand up 52 per cent to 97 tonnes.

US buying also rose by 43 per cent to 20.1 tonnes, while European demand fell 28 per cent to 47.5 tonnes.

Buying of small investment products like bars and coins rose 10 per cent overall to 377.7 tonnes in the first quarter, the WGC said.

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Jewellery buying was the sector showing the most strength, with offtake up 12 per cent to 551 tonnes.

China led the rise, with consumption rising 19 per cent year on year to a record 185 tonnes, while Indian buying rose 15 per cent to 159.5 tonnes.

"These figures show that notwithstanding the slowdown in China that we've seen, this was a very strong quarter, and all the evidence in Q2 so far is that it (demand) remained very strong in April as a result of the price fall," Grubb said.

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Demand for gold coins, bars and jewellery shot up to unprecedented levels last month, according to refiners and dealers, as waning investment knocked prices to their lowest in more than two years.

"We're sticking with our forecasts (for physical gold demand) for China and India this year, which is for Indian demand to come in between 865 and 965 tonnes, and Chinese demand at 780 to 880 tonnes," Grubb said.

Gold jewellery buying in the United States rose for the first time since 2005, by 6 per cent to 18.8 tonnes.

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European jewellery demand continued to decline, falling another 10 per cent in Q1 to 5.6 tonnes.

Bullion demand from central banks edged down 5 per cent to 109 tonnes, its lowest in nearly two years, but the official sector, once a major supplier of gold to the market, remained a net buyer for a ninth consecutive quarter, the WGC said.

On the other side of the market, gold mine supply rose 4 per cent to 685 tonnes in the first quarter, the WGC said, while gold recycling fell 4 per cent to 366.6 tonnes.

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GOLD DEMAND                                         

Source: World Gold Council Gold Demand Trends report Q1 2013