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Looks like gold is losing sheen in India. The first quarter of the financial year 2023-24, the demand for gold fell 7% to 158.1 tonnes. India is the world’s second largest market for gold. According to the World Gold Council report released on Tuesday, imports into India saw a jump of 16 per cent jump to 209 tonnes during Q2 of calendar 2023, from the year-ago period. In value terms, India’s Q2 gold demand was Rs 82,530 crore, an increase of four per cent from Rs 79,270 crore in the year-ago period.

With the first half of 2023 demand estimated at 271 tonnes, the full-year gold demand could be in the range of 650-750 tonnes in 2023, it added.

Gold prices have seen a sharp rise in a very short span of time to a peak of Rs 64,000 per 10 gram. Also, some demand got shaved off due to the overall tax compliance in the country.

The demand for gold jewellery dropped by eight per cent to 128.6 tonnes during the second quarter of this year, when compared with 140.3 tonnes in the year-ago period.

According to the report, 18k gold jewellery continued on an upward trend, as consumers were attracted by the affordability of these products.

Bar and coins demand also saw a marginal three per cent decline to 29.5 tonnes during Q2 of 2023, as against 30.4 tonnes in the year-ago period, the report said.

“Given the gold price, it would have been reasonable to expect far weaker gold jewellery demand. But arguably the supportive economic backdrop helped, with GDP growth forecast to increase by 6.3 per cent for FY 2023-24. “A knee jerk reaction to the ban of 2,000 rupee notes during the quarter had a brief but notable impact on gold demand,” it said.

Although demand has held up relatively well so far this year, the report said, “we are cautious regarding H2 prospects.” Local prices, although off their record highs, remain elevated. And although the domestic economy remains relatively healthy, there are indications of a slowdown in discretionary spending, with FMCG sales apparently declining during the quarter, it said.

“The success – or otherwise – of the monsoon season will also have a considerable bearing on demand for the remainder of the year,” it noted.
According to the report, gold recycling in India witnessed a sharp spike during the quarter, with an increase by 61 per cent to 37.6 tonnes, compared to the previous year.