India’s gold demand in the first quarter of 2023 fell 17 per cent year-on-year to 112.5 tonnes following high and volatile gold prices. In the corresponding quarter of 2022, demand was at 135.5 tonnes.

High gold prices impacted buyer sentiment and gold jewellery demand dropped to 78 tonnes from 94.2 tonnes in Q1 2022, with little support from the investment side. Investment demand during the quarter was at 34.4 tonnes compared with 41.3 tonnes in Q1 2022.

“Since 2010, barring the pandemic gap, this is the fourth time that Q1 gold jewellery demand fell below 100 tonnes. A sharp rise in gold prices and volatility combined with fewer auspicious days to trigger consumption, has led to many households deferring buying perhaps in anticipation of a downward price correction,” said Somasundaram P.R., regional CEO, India, World Gold Council.

Global factors, primarily US interest rate hikes pushing up dollar prices coupled with rupee depreciation kept gold prices high.

Data from the World Gold Council shows the average annual gold prices in rupee terms have increased from Rs 17,997.3 per 10 gm in 2010 to Rs 45,437.5 per 10 gm in 2022. During the first quarter of 2023, with a sharp volatility the average price was near the Rs 50,000 mark with the spot prices currently remaining above Rs 60,000 mark (see chart).

The council anticipates gold demand to remain soft in the next couple of quarters but expects the fourth quarter to throw in a surprise. “Although the trade sentiment remains high in the second quarter due to Akshaya Tritiya, but this year neither was the trade sentiment high, nor were the consumers prepared to buy,” said Somasundaram P.R.