World Gold Council: India gold demand to revive in 2017

The World Gold Council (WGC) expects a revival in demand for the yellow metal in India in the current calendar year after 2016 ended on a dismal note on account of a surge in gold price coupled with factors like an increase in excise duty and demonetisation.

The global body expects Indian gold demand to be about 650-750 tonnes in 2017. Demand was just a little more than 600 tonnes in the last calendar year.

Incidentally, the year 2016 saw gold demand in India falling to its lowest level since 2009 as government policies along with weak rural sentiment kept consumers away.

“It’s clear that India’s gold market faces short-term headwinds,” the WGC said in a report. “But looking ahead, these policies promise to deliver a stronger and more transparent economy. This will support gold demand, which we expect to be between 650-750t in 2017,” it said.

While the gold trade body said that the outlook for 2017 was “cautious”, it added that demand was likely to improve going forward.

“Over time, we anticipate that economic growth and greater transparency within India’s gold market will push demand higher: by 2020 we see Indian consumers buying between 850t and 950t,” according to the report. It added earlier attempts by the authorities to clamp down on gold had failed as gold is too intimately ingrained in the Indian society.

The global body further stated that while demonetisation did dent economic growth, it was helping large jewellery retailers and consumers in terms of transparency and quality.

“Demonetisation is also boosting large jewellery retailers, and they will continue to grab a larger share of the market. Over time, consumers will move away from cash towards digital payments, and organised players should benefit from this trend. This change in market dynamics will result in more transparency and a better deal for consumers, protecting them from shady practices such as under–carating,” the WGC said.

Further, while the government had put a cap of ₹3 lakh on cash transactions starting April 1, the Council was of the view that while it could hamper gold purchases, consumers might buy the precious metal in smaller quantities or might also look at the black market to bypass the regulations.

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