Gold returned 25 percent returns to its investors in the first 6 months of 2020. The yellow-metal which has had a fair number of lovers and haters was accorded top honors as the go-to investment asset. The reasons for the unabashed love were disappointing returns with other investment assets and probably the lack of hope in an early revival from Covid-19.
With the festive season around, here's a little recap on how Gold fared in the last six months. And, whether Covid affected demand for India's most loved precious metal - Gold.
1. Feeble Imports:
India regularly imports 800-900 tonnes of gold per annum. Statistics for the month of April'20 was a mere 50 kilos. In the last six months, India barely imported 100 tonnes, with the Commerce Ministry data indicating a 77 percent decline. Trends for March (down by 62.6%), April (99.93%), May (98.4%), and June (77.5%) were all in the red. Lower Gold imports, however, are a healthy sign for India's Current Account Deficit. A positive CAD has immense benefits for the economy and currency.
2. Low to No Jewellery Sales:
Even central banks resisted the urge to buy Gold while the common man saw Gold rates head north. Central bank purchase of bullion was nearly 40 percent below 2019 level - 233 tonnes.
According to the World Gold Council, jewellery demand in the first half halved to 572 tonnes in the world owing to COVID-19. The demand in the second quarter of 2020 (April-June) was mere 251 tonnes.
In India, jewellery consumption was a mere 109 tonnes in the first half of 2020. In the first half of 2019, jewellery consumption was reported at nearly 180 tonnes.
3. Gold Loan searches sizzle:
Through the year, netizens asked Google a number of questions on Gold loans and moratorium. Strained by the economic impact and joblessness, the only way to sustain for many was a Gold loan. Searches remain highest for SBI Gold Loan, Canara Bank Gold Loan, Federal Bank Gold Loans, Mannapuram Finance, Muthoot Finance etc.
Shares of Muthoot trading on the domestic exchanges were a D-Street darling during the first half of 2020. This, after the company reported a growth in gold-loan portfolio of Rs 3,113 crores to Rs 41,611 crores for fiscal ending June 2020. Also, digital lending processes helped the NBFC quadruple its loan disbursals.
4. Gold rates consistently spurts:
In the month of March and April when most jewellers wore a deserted look, Gold constantly hit a peak. The biggest peak was in the first week of August when international Gold rates hit $ 2,000 per ounce. In India, the rates hovered around 53,000 to Rs 54,000 per ten grams. Many bullish analysts signalled Gold to touch 55,000 by Dhanteras time.
5. Record Inflow into ETFs:
The main reason for Gold's brisk appreciation was not jewellery, coins or bars but sizzling ETF activity. A dip in currencies such as Dollar, Euro, Sterling and Renminbi caused the US dollar gold price to gain by 17 percent in H1. ETF activity in H1 was a record-breaking 734 tons - higher than the 2009 annual record of 646t and lifted global holdings to 3,621t.
In India, AMFI data showed Gold exchange traded funds infusing over Rs 3,500 crore in the first six months of 2020. In the first half of 2019, investors pulled out Rs 160 crore from ETF markets.
6. Unusual interest for Sovereign Gold Bonds:
India bought approximately 17,186.09 kilos (1 unit is 1 gram) of Sovereign Gold Bond worth Rs Rs 8,498.53 crores (according to tranche wise data available until Aug'12). What's surprising is the love for Gold in the month of August when rates shot off to the highest of Rs 5334 per SGB. The subscription for Series-V alone was a massive 6,349.78 kilos at Rs 3,386.97 crores. The date of subscription for Series VI will commence from August 31 - Sept 4.
With the unlock activity in full swing and the festive season around the corner, analysts and jewellers are hopeful of an uptick in Gold sales to make up for a lost H1. But will rates cool?
Disclaimer: Sify.com is subscribed to AFP. Lead image is attributed to Sam Panthaky for AFP - Owner of a jewellery shop (L) helps a customer to try a handmade facemask made from threads of gold at a jewellery shop in Chandkheda area in Ahmedabad on August 11, 2020.