Gold jewellery demand in India bounced back in the final quarter (Q4), with the demand for the yellow metal registering a 4% year-on-year growth to 189.6 tonnes, the World Gold Council said in its Gold Demand Trends 2017 report released on February 6. It was the highest fourth quarter in 17 years of the report, the World Gold Council noted.
The report gave a host of reasons as driving this uptick. "In contrast with Q3, when the price was in almost permanent discount, the local price traded at a small premium to the international price for much of Q4. October started well: the Dhanteras festival - marking the start of the wedding season - coincided with a dip in prices, which encouraged demand," it said.
Also supporting Gold demand, according to the World Gold Council, were:
* The Indian economic backdrop that helped bank loan growth.
* The government's decision to remove anti-money laundering regulation from jewellery.
"The Prevention of Money Laundering Act (PMLA), which was extended to the gems and jewellery sector in August, had negatively affected jewellery demand as consumers and retailers were faced with a heavy administrative burden to prove the veracity of cash transactions. The effect was most pronounced in rural areas, where cash is widely used. The removal of the PMLA from the sector therefore had a positive impact on demand," the report noted.
* Improved rural sentiment.
"Consumers in rural areas are the driving force behind Indian gold jewellery demand. Positive sentiment among this demographic is quickly felt in certain areas of the economy, the gold jewellery market being one of them. Sentiment was vastly improved compared with Q4 2016, when these consumers were struggling with the drastic and unexpected demonetisation of the economy. A 6% increase in the minimum support price for kharif crops also helped," the report said.
The World Gold Council also observed that both gold buyers and sellers are increasingly at ease with the recently implemented Goods and Services Tax (GST) system. Organised retailers, who were best equipped to transition to the GST system, found the tax worked to their benefit and they increased their share of the jewellery market, the report noted.
"Looking forward, we expect a continued recovery in demand as the market increasingly accepts, and adapts to, GST. And the relative outperformance of chain stores and organised retailers is, in our view, likely to be a key feature of this recovery," the report noted.
* First year of growth in jewellery demand across the world since 2013
Stable gold prices and improving economic conditions helped jewellery demand grow 4% to 2135.5 tonne, albeit still below historical levels.
* Gold in Technology ended six-year downtrend
Technology demand climbed 3% in 2017, chiefly due to the growing use of sensors in smartphones and vehicle safety features.
* Official gold reserves swelled by 371.4 tonnes, 5% down on 2016
* Turkey and Russia were the most prominent of the central bank buyers.
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