High gold prices have dampened domestic demand in the second quarter of calendar year 2023. Total demand for gold during the quarter stood at 158.1 tonnes compared with 170.7 tonnes in Q2 of 2022, down 7 per cent.
While jewellery demand at 128.6 tonnes was down 8 per cent, investment demand at 29.5 tonnes was down 3 per cent over the corresponding previous period, the World Gold Council said on Tuesday.
“The decline in demand is largely due to high average prices of gold. The prices in India were up 4 per cent over the last quarter and 12 per cent up over the corresponding period last year,” said Somasundaram PR, regional CEO, India, World Gold Council.
“We did hear from pockets where apparently people tried to buy gold at a higher price. But it was not a repeat of what we saw earlier and nothing significant to talk about,” he said on panic purchase following withdrawal of Rs 2,000 currency notes.
During the quarter there was a sharp 61 per cent year-on-year rise in gold recycling to 37.6 tonnes with the council stating that consumers would likely have opted to book profits due to high gold prices.
The council remained cautious about domestic demand amid uncertainties due to elevated local prices and slowdown in discretionary spending. “The success of the monsoon season could bolster sentiment ahead of the Diwali season and throw positive surprises. With H1 2023 demand at 271 tonnes, our estimate for the full year gold demand is in the range of 650-750 tonnes,” he said.
Globally gold demand has dropped 2 per cent year-on-year to 921 tonnes during Q2.
While jewellery demand was flat, investment demand was up 20 per cent during the quarter. Second quarter central bank demand was down 35 per cent to 103 tonnes, primarily driven by net sales in Turkey due to country specific political and economic circumstances.
However, central banks have purchased a record amount of 387 tonnes during the first six months of 2023, the World Gold Council said.
As of June 2023, India remains in the top 10 countries in terms of official gold holdings with reserves of 797.4 tonnes.
