BIG JUMP! Gold demand surged by nearly 40% in January-March Quarter—WGC says THESE reasons pushed yellow metal demand

The yellow metal is considered to be a safe investment option during situations like coronavirus. In this regard, the World Gold Council in the quarterly report said that gold demand in the January-March quarter in India soared by 37 per cent to 140 tonnes as against the same period last year.  

The quarterly report released by the World Gold Council on Thursday states, “Robust retail demand pushed the local market gold price premium to a 51-month high of US $7/oz in early March in India.”  

Pointing out the results for this huge surge, the council mentions, “Substantial wedding purchases, encouraged by declining gold prices, and improving consumer sentiment buoyed by a pick-up in economic activity, supported Indian gold jewellery demand in Q1.”  

On the contrary to India’s demand, the global demand for the gold has declined. The council, in this regard, said, the demand for globally dropped 23 percent YoY basis to 815.7 tonnes, mainly driven by outflows of gold-backed exchange-traded funds (ETFs) and low central bank buying.  

In terms of investment, the council points out that Indian retail investment improved for the third consecutive quarter. Bar and coin demand grew 34 per cent YoY to 37.5 tonne – the strongest first quarter in India since 2015, it added. “Investment benefited from factors similar to those supporting jewellery demand: a lower domestic gold price coupled with improving economic indicators.”  

The report mentions that the domestic gold price corrected by 5.6 and 5.2 per cent in February and March respectively, with these pullbacks being viewed as a buying opportunity by retail investors.  

Concerned about the rising covid cases in India, WGC pointed out that the prospects for Q2 (April-June) in India are less certain as fresh lockdowns attempt to deal with the second wave of COVID-19 currently affecting the nation.  

“The trade is better equipped to weather a further lockdown, having adopted digital and omnichannel retail strategies in 2020, and attempts by the central government to avoid a full national lockdown may mitigate the impact on gold demand,” the council added.