India's gold demand falls over 28% in Q3 of 2016: WGC

The global demand for gold during the quarter dropped 10.14% to 993 tonnes as compared to 1,104.8 tonnes in the same quarter of last year. Representational Image. Image Source: Reuters

India's gold demand has fallen over 28% in the third quarter (Q3) of 2016 on the back of strict government policies, high and volatile gold prices and fragile sentiment among the rural population, according to World Gold Council's (WGC) latest 'Gold Demand Trends' report.

The country's total gold demand during July to September quarter declined 28.17% to 194.8 tonnes as against 271.2 tonnes in the July to September quarter of 2015.

"In India, more stringent government policies, high gold prices and a squeeze on disposable rural incomes combined to dampen consumer sentiment. These were key factors in total global jewellery demand falling 21% year-on-year to 493 tonnes," World Gold Council (WGC) said in a press release on Tuesday.

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The global demand for gold during the quarter dropped 10.14% to 993 tonnes as compared to 1,104.8 tonnes in the same quarter of last year.

China, too, has witnessed a fall of nearly 22% in gold demand during the quarter under review.

The consumer demand for gold in China during July to September quarter declined 21.94% to 182.5 tonnes as against 233.8 tonnes in the same quarter of previous year, showed the WGC data.

"In China, ongoing economic uncertainty contributed to a softening in sentiment towards the precious metal, which was magnified by high gold prices and changing consumer behaviour," WGC said in a statement.

“The core physical markets of India and China continued to suffer under high prices and squeezed incomes in the third quarter (Q3), but it looks like the fourth quarter (Q4) may be better. Price expectations have always been a key trigger for gold purchases and consumers responded quickly to the price drop in early October," WGC head of market intelligience Alistair Hewitt, said in a statement.

The council has projected India's gold demand to grow in the fourth quarter (Q4).

"In the case of India, the first healthy monsoon in three years will boost rural incomes, supporting demand during the festive and wedding season," Hewitt said.

The total global investment demand for gold during the quarter rose 44% to 336 tonnes as compared to 232 tonnes in the same quarter of last year on the back of rise in inflows of gold-back exchange traded funds (ETFs), it said.

“We continued to see flows into gold-backed ETPs in the third quarter (Q3), taking year-to-date inflows at the end of September to 725 tonnes. Institutional investors have looked to hedge against uncertainty stemming from geopolitical risk, inlcuding Brexit, the US Presidential race and the potential impact of elections in France and Germany next year. In addition, negative interest rates – a theme ever present this year - continued to underpin institutional demand,” cited Hewitt.

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