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    Third Covid wave, inflationary pressure and high prices drags gold demand

    Synopsis

    Total jewellery demand in India for Q1 2022 decreased by 26% at 94.2 tonnes as compared to 126.5 tonnes of Q1 2021. Total Investment demand for Q1 2022 stood at 41.3 tonnes increased by 5% from 39.3 tonnes in Q1 2021.

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    Somasundaram PR, Regional CEO, India at WGC said "After rising to record levels in Q4 2021, India’s gold jewellery demand fell by 26% y-o-y in Q1 2022 to 94 tonnes."
    The third wave of Covid, inflationary pressure and high gold prices pulled down gold demand in the country in the first quarter of calendar 2022 by 18% to 135.5 tonnes as compared to Q1 of CY 2021, according to World Gold Council (WGC). Jewellery demand fell by 26 per cent, the lowest since 2013, while investment demand went up 5% from the same quarter of CY2021.

    Total jewellery demand in India for Q1 2022 decreased by 26% at 94.2 tonnes as compared to 126.5 tonnes of Q1 2021.
    Total Investment demand for Q1 2022 stood at 41.3 tonnes increased by 5% from 39.3 tonnes in Q1 2021.

    Total gold recycled in India in Q1 2022 was 27.8 tonnes, up 88% from 14.8 tonnes in Q1 2021, and total net bullion imports in Q1 2022 was 132.2 tonnes, down 58% from the same period last year.

    Somasundaram PR, Regional CEO, India at WGC said "After rising to record levels in Q4 2021, India’s gold jewellery demand fell by 26% y-o-y in Q1 2022 to 94 tonnes."

    Since 2010, barring the pandemic periods, this is only the third time the Q1 total has been below 100 tonnes. Fewer auspicious days coupled with a sharp rise in gold prices meant fewer weddings and a pause in retail demand with households postponing gold buying in anticipation of a price correction. However, investment demand, primarily gold bars and coins, grew 5% to 41 tonnes with rising prices and volatility in equity markets acting as support."

    With safe-haven demand and rupee depreciation pushing gold prices above Rs 50,000/10g, discussions with trade revealed that most of the buying was lower ticket items such as 10g and below. The hiatus in growth could be a result of mixed sentiments in the market about price, uncertainty about covid caused in neighbouring market, fear of inflation and long-term impact of the global conflict, he added.

    The WGC executive said the impact of revival in the rural markets, more particularly with forecast of a normal monsoon for a consecutive year, is likely to be significant for gold in 2022. The ongoing geopolitical situation has reinforced gold’s role as a mandatory asset in every portfolio for its diversification and hedging properties when it matters, he said, adding that this year's Akshay Tritiya demand will be higher than last year but will not surpass the pre-Covid level.


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