India's gold demand may dip by 33% at 700 tonne in 2012: WGC
Mumbai: Gold demand in India is likely to drop by around 33 percent at about 700 tonne due this year to weak consumer sentiments following record high local prices and rising inflation following concerns over weak monsoon, the World Gold Council said Thursday.
"The overall demand in the country for this year is likely to be in the range of 688-700 tonnes, which will be around 28-33 percent lower than last year," WGC Managing Director, India and Middle East, Ajay Mitra told reporters here.
However, the demand is likely to recover in the second half of this year following the upercentoming festival and marriage season in the last two quarters and confidence building measures expected to be taken by the Finance Minister, he said.
"In our view the worst is over. There is going to be a recovery due to the festivals. We expect the rate of decline to shrink. We also think the host of measures expect to be taken by the finance minister will help in strengthening consumer confidence," he said.
In the first half gold demand declined by 15 percent in value at Rs 1,05,867 crore compared to Rs 1,24,649 crore in the corresponding period in 2011. In terms of tonnage the demand also went down by 36 percent at 383.2 tonnes from 596 tonnes in the first half of 2011.
"Gold demand in the first half of 2012 has been subdued, primarily due to the poor macro economic conditions. India's economy has expanded at the slowest pace in nine years during this period. General sentiment is low with India staring at below 6 percent GDP growth in fiscal year 2012-13 due to the deficit in monsoon rains and the gloomy global economic outlook," Mitra said.
He further said, gold demand was affected by a number of factors, like slowing GDP growth, record high local gold prices, and fluctuations in the exchange rate were compounded by domestic inflation and concerns over a weak monsoon.
Jewellery demand also decreased by 8 percent in value terms to Rs 72,634 crore in the first half of this year compared to Rs 78,947 crore in the same period last year.
In tonnage, jewellery demand fell 30 percent to 262.9 tonne from 378 tonne in 2011.
Investment demand was worth Rs 33,232 crore, a 27 percent year-on-year decline and in tonnage terms it was at 120.3 tonne 45 percent down from same period last year.
The local gold prices increased by 29 percent in the second quarter to a average of Rs 28,000 per 10 grams from Rs 21, 670 in the corresponding quarter last year, while globally the growth in price was only 7 percent.
Talking about imports, Mitra said, it stood at 340 tonne in the first half and during July was the best since January.
"If there is a slowdown in scraps, the imports may grow," he added.
The global supply declined by 48 percent to 1,117.8 tonne in the first half compared to 2,144 tonne last year mainly on account of adverse weather conditions and production interruptions at number of operations.
Going forward, the mine production is likely remain in consolidation phase for the remainder of 2012, ahead of a further raft of new operations scheduled to come online next year.