India’s gold demand has declined 18 per cent to 135.5 tonnes in the first three months of 2022 primarily because of a sharp rise in prices, according to the World Gold Council. Demand is likely to remain soft during the second quarter because of price volatility.

Jewellery demand in the January-March period was 94.2 tonnes, down 26 percent from 126.5 tonnes during the corresponding period of 2021.

Investment demand, however, grew 5 per cent to 41.3 tonnes during the January-March period compared with 39.3 tonnes during the same period a year ago.

Somasundaram P.R, regional CEO, India, World Gold Council, said the hiatus in growth could be a result of mixed sentiments in the market about price, uncertainty about Covid, fear of inflation and long term impact of global conflict.

“Since 2010, barring the pandemic periods, this is only the third time the Q1 has been below 100 tonnes. Fewer auspicious days coupled with a sharp rise in gold prices meant fewer weddings and a pause in retail demand, with households postponing gold buying in anticipation of a price correction,” he said.

“Investment demand, primarily gold bars and coins, however, grew 5 per cent with rising prices and volatility in equity markets acting as support... Discussions with trade revealed that most of the buying was lower ticket items such as 10gm and below,” he added.

The council however remains bullish on gold's role as an asset class amid global uncertainties. "The ongoing geopolitical situation has reinforced gold's role as a mandatory asset in every portfolio for its diversification and hedging properties when it matters, and this will strengthen the relevance of gold across the spectrum," said Somasundaram PR.

Net bullion imports during the January-March period were 132.2 tonnes, a decrease of 58 percent compared to 313.9 tonnes in the same period a year ago

Globally gold demand during the January-March period was 1234 tonnes, up 34 percent over 919 tonnes in the corresponding year-ago period due to strong ETF flows. World Gold Council said in a statement that the geopolitical crisis weighed heavily on the global economy and gold price briefly to USD 2070/oz in March.