India's gold demand may touch up to 950 tonnes level by 2020 on economic growth, greater transparency says WGC

Economic growth and greater transparency within the country's gold market will boost demand for the yellow metal up to 950 tonnes level by 2020, World Gold Council (WGC) said in a report on Wednesday.

India's gold demand has fallen sharply in the past, but recovered subsequently, and attempts by the authorities to clamp down on the yellow metal failed as it is too intimately ingrained in the society, mentions the report.

WGC said after plummeting last year, demand for the precious metal is unlikely to fall further.

"While demand is likely to improve, our view for 2017 is cautious: we expect consumers to buy between 650 tonnes and 750 tonnes. However, over time, we anticipate that economic growth and greater transparency within India's gold market will push demand higher. By 2020, we see Indian consumers buying between 850 tonnes and 950 tonnes," the report added.

It is likely that the impact of demonetisation will have a behavioural impact too, the report stated.

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

"We conducted a large scale piece of consumer research in quarter one 2016, in which 63% of respondents in India agreed with the statement 'I trust gold more than the currencies of countries'. And 73% of respondents in India agreed with the statement 'gold makes me feel secure for the long-term'," the report said.

The demonetisation programme, hence, will underpin these beliefs.

Demonetisation is also boosting large jewellery retailers and they will continue to grab a larger share of the market, the WGC said.

Over time, it said, consumers will move away from cash towards digital payments, and organised players will benefit from this trend.

This change in market dynamics will result in more transparency and a better deal for consumers, protecting them from shady practices like under carating, WGC added.  

ALSO READ: India's gold demand fell sharply by 21% to 676 ton in 2016