Long-term investors were active, but short-term ones stayed away
Duty hike, which brought down the demand for gold in the first quarter of 2012, became a main catalyst in Q1, 2013 in pushing it up by 27 per cent. This quarter also saw the long-term investor active in gold markets across countries, with global gold ETFs witnessing considerable outflows.
According to the World Gold Council, the volume of gold consumption in India went up in the first quarter to 256.6 tonnes against 202.1 tonnes in the year-ago quarter. In value terms, demand went up to Rs 72,899.4 crore, a rise of 32 per cent, against Q1 2012. A key factor that triggered demand was the January duty hike and fears of another hike in the Union budget.
Talking to Financial Chronicle, Bachhraj Bamalwa, former chairman of All Indian Gems and Jewellery Trade Federation, said: “In the first week of January, the government had indicated that there was a need to restrict gold imports. Fearing a possible duty hike, traders stocked up the metal before the hike was announced on January 21”.
In February, there were apprehensions of another hike in the budget. This too led to considerable inventory build-up.
In the first quarter of 2012, on the other hand, the confusion stemming from the duty hike and change in the duty structure had made buyers as well as stockists stay away from the metal.
Jewellers too went on a nation-wide strike in March-April to protest the excise duty, which saw demand dip by 29 per cent.
According to P R Somasundaram, managing director, WGC, India, the softening of prices in Q1 of 2013 from the previous quarter too played its role in pushing up demand.
“The average quarterly price of gold in the March quarter was Rs 28,420 per 10 gm against Rs 29,965 in the previous quarter.
Also, a stronger rupee in February made people make use of the price levels,” Somasundaram said. In November 2012, the spot market had seen gold touching Rs 33,000 per 10 gm.
The long-term investor was active in that quarter. The total demand for jewellery in India was up by 15 per cent at 159.5 tonnes. Investment demand, which also includes coins and bars, was up 52 per cent at 97 tonnes against 63.8 tonnes in Q1, 2012.
Jewellery demand in China was up 19 per cent; in the Gulf it was up by 15 per cent and in the US it showed an increase of six per cent, for the first time since 2005. Demand for bars and coins was up by 22 per cent in China and by 43 per cent in the US.
The short-term investor stayed away as the holdings of global gold ETFs fell by 177 tonnes.
Source : mydigitalfc.com