Jewellery demand in India fell by 26% y-o-y in Q1 to 94t after reaching a record high in the last quarter of 2021, the World Gold Council (WGC) said.
The lack of auspicious gold-buying days and wedding days in January was followed by a sharp rise in the gold price in late February/early March – a combination that proved detrimental to jewellery buying, it added.
The gold price breached the key psychological Rs 50,000/10gm at the end of February, before rising to above Rs 53,000/10gm in March. In response, consumers postponed gold purchases, hoping for a price correction…or at least a stabilisation. Sluggish demand in March resulted in the local market discount widening as far as US$60/oz – its highest for 18 months.
The outlook for Q2 demand in India is positive, although further increases in the gold present a downside risk to demand. Demand in the second quarter will receive support from festival purchases (Akshaya Tritiya – a key gold-buying festival – falls in the first week of May) and wedding season buying.
Underlying consumer sentiment is improving, which should also prove supportive: the Reserve Bank of India’s Consumer Confidence Index increased to 71.7 in March from 64.4 in January. However, demand could face headwinds should there be further increases – or heightened volatility – in the gold price, while broad-based inflation may also curb demand by squeezing disposable incomes, WGC added.