Demand for gold down by 3%, India looking ahead for a better performing quarter: WGC

Somasundaram PR, Regional CEO of World Gold Council, shared the report on the last quarter of 2023 virtually on January 31

Mumbai: World Gold Council announced their Gold Demand Trends Report (October-December) Q4 on January 31. Somasundaram PR, Regional CEO of the World Gold Council, shed light on the performance of gold in 2023 and discussed the repercussions of the ongoing high gold rate on the supply chain.  

Talking about the performance of India and China, Somasundaram said that with 747 tonnes this year, India’s demand is down 3%. “The gold consumption is way below 797 tonnes in 2021. Bars and coins performed better, and stand at 18% or 85 tonnes, thanks to a good performance in Q4. Overall, 6% down in jewellery and 7% up in bars and coins,” he said, explaining how greater reliance on bars and coins is a general reaction of the market to high prices. 

“People tend to buy more gold with lesser making charges as prices rise. That is when bars and coins are bought when people don’t need jewellery immediately,” he maintained. The WGC report put recycling at 117 tonnes this year, with an impressive 20% increase from the last year. This is significant considering India lacks an ecosystem for recycling and struggles with incentives and GST. 

With imports up by 20% and demand down by 3%, the trade sentiment is definitely ahead of the consumers as all hopes are on the upcoming quarter and Akshay Tritiya, which will influence imports. “There are reports that people use certain loopholes like gold fillings to import gold at concessional rates, which also reflected discounts in bars. That factor partially accounts for the rise in imports,” he maintained.

“Reserve Bank of India bought 16 tonnes of gold last year. They have been consistent buyers. Mined supply has increased by 1%, prices are up by 15% in dollar and rupee terms. Prices started moving up since 2019, yet India has continued to buy 700-800 tonnes, except for unforeseen circumstances of the lockdowns. When a market is like this. I believe the combination of these factors will lead to an increase in gold demand. The price is range-bound and other than any other serious geopolitical scenario, India will move up to the next band of 800-900 tonnes. Gold demand in 2024 will be higher than in 2023,” Somasundaram maintained. While considering election results to be a major determiner of public spending, he said that digital gold and electronic gold receipts will popularise. 

Talking about the Indian International Bullion Exchange (IIBX) and the self-regulatory organization of WGC, Somasundaram said that IIBX will champion the causes of the right infrastructure for the domestic market to speed up the movement of responsibly sourced gold with transparent pricing in a framework wherein banks can also participate. 

“With organized players coming in, ESG is becoming a big aspect of every industry. So, we need to pool these best practices through the SRO, which involves voluntary participation. The code of conduct will eventually push certification as a symbol of trust for organized retail. This would ultimately influence consumers to buy from organized and ethical players,” he said.

Talking about the challenges and opportunities faced by retail jewellers, particularly in gold, Somasundaram pointed out over-dependence on traditional Indian weddings and generic gold advertisements. “We are also over-reliant on women buying gold. Gold, on the contrary, should be expanded from the purview of weddings to moments of self-purchase. There hasn’t been much innovation in men’s gold jewellery. On the other hand, organized retailers with IPOs and store expansions are leading the industry to good governance,” said Somasundaram.

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