Covid-led lockdowns may dampen India’s gold demand in Q2: World Gold Council

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Demand for gold in India could slow down in the April-June quarter on account of COVID-19 led restrictions, according to a report by the World Gold Council’s (WGC).

The WGC report on ‘Gold Demand Trends Q1 2021’ indicates that the prospects for Q2 in India are less certain as fresh lockdowns attempt to deal with the second wave of COVID-19.

The demand for gold in (Q1) that is the January-March quarter was positive and saw a growth of 37% year-on-year (YoY) at 140 tonne due to ease of restrictions, pent-up demand and softening of prices.

Total jewellery demand in India for Q1 was up by 39% at 102.5 tonne, as compared to 73.9 tonne in Q1 2020. The value of jewellery demand on the other hand was at Rs 43,100 crore, which is an increase of 58% from Rs 27,230 crore in Q1 2020.

As per the World Gold Council, following the shock of 2020, the jewellery demand recovered in Q1. A combination of softening gold prices, buoyant consumer sentiment following a sharp pick-up in economic activity and return of social activities supported gold demand in India in Q1, which is otherwise traditionally a seasonally weak quarter.

Akshaya Tritiya

However, looking at the fresh restrictions and the resurgence of Covid cases, experts say this may mean a muted Akshaya Tritiya in the month of May.

Somasundaram PR, managing director of WGC (India), has been quoted in the media saying that with lockdowns being re-imposed in various regions, consumer confidence has dipped.

While maintaining a cautious outlook on the second quarter, he said, “This is likely to impact wedding demand in Q2 of 2021.”

He also added by saying, “We are unable to quantify the impact on full year gold demand as we do not have sight of several critical factors currently at play”.

WGC highlighted that the bullion trade is now better equipped to weather lockdown restrictions, having adopted digital and omni-channel retail strategies. Also, attempts by central government to avoid a full national lockdown may mitigate the impact on gold demand.

World Gold Council experts expect gold demand in India to rebound in the second half of 2021.

In a WGC statement, senior market analyst Louise Street, said, that globally, looking ahead at the rest of the year, “there are reasons to be optimistic about the gold market” as its main drivers remain well supported.