In a report released by World Gold Council, gold demand has fallen by 24 per cent year-on-year (yoy) to 146 tonnes after witnessing growth for three successive quarters (192.8 tonnes in Q3 2016). Monetarily speaking, the gold demand for Q3 in 2017 was worth Rs. 38,540 crores down by 30%.
The reason behind this sudden dip in demand has been attributed to Goods and Services Tax (GST) introduced in July and anti-money laundering legislation (AML) for jewellery retail transactions.
Jewellery demand has also taken a severe dip as it fell by 25% to 115 tonnes in Q3 compared to 152.7 tonnes in the previous year. Converted to monetary terms, the value of jewellery demanded was Rs 30,340 crores, down by 31% from Q3 2016 (Rs.43,880 crore). The demand for gold bars and coins also dropped by 23% to 31 tonnes.
“The drop can be attributed partly to some advance buying in Q2 to pre-empt the introduction of GST in Q3. However, with the industry’s gradual transition to GST proceeding on expected lines, and the removal of AML legislation, demand during the festive season seems to show clear signs of recovery in the last quarter,” said Somasundaram PR, Managing Director, India, World Gold Council.
WGC further said in its report that it expects the full year demand in 2017 to be between 650 to 750 tonnes; which is exceptionally low considering the five-year average period taken into consideration by the Council.