China set to usurp India as world's biggest gold consumer: WGC

Gold demand during the last quarter of this year is likely to be lower than the same period in 2012, however, it will be higher than the July-September period as the demand is picking up and traditionally it is the buying season, World Gold Council said today.

"Supply constraints and high inflation resulted in decline in gold demand by 32 per cent to 148.2 tonnes compared to 219.1 tonnes in the same period last year.

"Going forward in quarter in the fourth quarter, we expect the demand to be more from the third quarter as the fourth quarter is traditionally a busy season capturing the post-monsoon rural spending, major festivals and auspicious wedding days," World Gold Council Managing Director (India) Somasundaram P R said today.

However, the demand during the last quarter of 2013 is likely to remain lower compared to the fourth quarter of 2012, due to supply constraints this year following the government restrictions, he added.

The industry body cut its outlook for Indian demand in 2013 to around 900 tonnes from the 1,000 tonnes predicted previously, while keeping its forecast for China unchanged at 1,000 tonnes.

The industry body cut its outlook for Indian demand in 2013 to around 900 tonnes from the 1,000 tonnes predicted previously, while keeping its forecast for China unchanged at 1,000 tonnes.

The demand during Q4 of 2012, stood at 262 tonnes.

In value terms, the country's Q3 2013, gold demand declined by 39 per cent to Rs 39,278.2 crore from Rs 64,200.9 crore in Q3 of 2012, according to World Gold Council data.

Total Jewellery demand during Q3 2013, was down by 23 per cent at 104.7 tonne compared to 136.1 tonnes in the corresponding quarter of 2012.

The value of jewellery demand saw a decline of 30 percent at Rs 27,749.2 crore, from Rs 39,880.2 crore in Q3 of 2012.

Total investment demand declined by 48 percent at 43.5 tonne compared to 83 tonne in Q3 of 2012.

In value terms, gold investment demand dropped by 53 per cent at Rs 11,529 crore from Rs 24320.7 crore from the same period of last year. Total gold recycled in India in Q3 2013, shot up to 61.3 tonne from 34 tonne in Q3 2012. "The third quarter was an exceptional period where the recycled gold increased due to high price and various schemes that incentivised the consumers," Somasundaram pointed out.

When asked about imports, he said, it has begun but is very slow and during the July-September quarter it stood at 85 tonne, while the demand was 148 tonne.

"Imports has seen little bit of limitations. If this supply restrictions continue the demand in Q4, which will remain strong, will be met through the unofficial channel, which has grown significantly. In Q4, we believe the imports will be higher than the third quarter," he added.

WGC sees China well ahead of India as world's No.1 gold consumer

In fact,China is this year set to usurp India as the world's biggest gold consumer by a convincing margin as strict import rules introduced by New Delhi bite, the council pointed out.

India, grappling with a high trade deficit and a weak rupee, imposed a series of measures this year to crimp demand for the precious metal - the second most expensive item on its import bill after oil.

It introduced a record 10-percent duty on gold imports and tied the volume of imports to exports, making it more difficult and expensive for gold to be sold to domestic markets. Imports plunged to 24 tonnes in October from a record 162 tonnes in May.

But the WGC warned that gold was finding its way into India through unofficial channels. It did not give an estimate on supply through smuggling.

"Gold entering the country unofficially through India's porous borders helped to meet pent-up local demand, together with an influx of recycled gold that was drawn out by higher prices and promotions offered by retailers," the WGC said in its quarterly report.

"It is likely that unofficial gold will continue to find its way into the country to satisfy demand."

Gold forms a key part of a bride's dowry in India and is considered auspicious as a gift or offering at religious festivals.

Local premiums hit a record $130 an ounce earlier this month as supplies were scarce in the build up to the peak gold buying season of Dhanteras and Diwali. However, demand failed to match last year's appetite and premiums have since eased.

"This quarter there wasn't runaway demand as we had estimated," said Somasundaram PR, WGC's managing director for India, commenting on fourth-quarter appetite. "It is going to be lower than last year."


Global appetite for gold fell 21 percent in the third quarter due to outflows from physical bullion funds and the drop in buying from India, according to the WGC.

But mainland Chinese demand remained strong even during the seasonally slow third quarter, gaining 18 percent while Indian demand dropped 32 percent.

Demand from China has jumped nearly 40 percent this year as the appetite for jewellery, bars and coins increased sharply due to the sharp drop in gold prices.

Chinese demand has to an extent been able to stem the drop in global gold prices, consuming a big part of flows that were lost due to the strict rules in India and the outflows from exchange-traded funds.

"The flow of gold from the west to east is continuing," said WGC's Cheng. "Western investors do not see the opportunity in gold but Asians are picking it up, more so in China than India."

Fourth-quarter demand will also remain strong as buying picks up ahead of the Chinese New Year at the end of January, he said.


Updated Date: Dec 21, 2014 01:04 AM

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