A nationwide lockdown, lost festival demand and the higher gold price pushed Indian jewellery demand down by 74% year-on-year to 44t – the lowest quarterly total in our series by some margin.
H1 demand was down 60% to an all-time low for our series of 117.8t, the World Gold Council said.
The strict lockdown imposed in late March ran through until mid-May, encompassing the all-important gold buying festival of Akshaya Tritiya – one of the most auspicious days for buying gold in India. This year, however, the country-wide lockdown meant that physical store sales were not possible, and only those retailers with an online presence were able to cater to demand. Sales were trivial in comparison with the previous year.
As restrictions eased mid-quarter, activity started to recover in select regions. June saw a further improvement, with the release of some pent-up demand. However, a lack of weddings and auspicious days in the month, along with recurring lockdowns in certain regions and the high and rising gold price, prevented a meaningful recovery in demand.
Discretionary spending on gold jewellery shrank due to concerns around economic growth, future income and higher gold prices, the WGC said.
India’s GDP growth has been on a downward trajectory since Q1 2019 and this was accentuated by the outbreak of COVID-19. Economic slowdown, job losses and restrictions on store operations meant consumers became more cautious in opening their wallets to buy gold.
According to a Reserve Bank of India (RBI) survey, the Consumer Confidence Index fell to a historic low of 63.7 in May from 85.6 in March, and the one-year ahead confidence index also recorded a sharp fall. Discretionary spending on gold jewellery was further quashed by local domestic gold prices – the average domestic price for Q2 was Rs46,381/10gm – 44% higher y-o-y.
The WGC report said jewellers are adopting online channels to boost sales. The pandemic has disrupted the bricks and mortar business model of Indian gold retailers and has become a catalyst for retailers to adopt online channels to boost sales.
While sales via digital channels are still nascent, jewellery retailers are increasingly implementing an omni-channel strategy integrating both offline and online channels to boost sales.