Coronavirus lockdown: India’s Q1 gold jewellery demand drops 41%, Q2 slump to be more severe, says WGC

India’s January-March gold jewellery demand fell 41% to an eleven-year low of 73.9 tonnes as COVID-19 compounded the woes of middle-class urban consumers and rural consumers, who turned more cautious in opening their wallets, resulting in a decline in footfall to jewellery stores, the latest research from World Gold Council said Thursday. It said the April-June demand slump could be more severe as the lockdown to contain COVID-19 extended into May, hitting the wedding-related purchases. This was followed by a gradual closing of retail stores mid-month before the full lockdown was imposed in the final week of the quarter. At the global level, the dominant theme in the gold market remains that the yellow metal is unprecedented investor demand through exchange-traded funds (ETFs). Turning back to India, it said, “Although the wedding season lifted demand early in the quarter, a sharp increase in local gold prices from mid-February led to a slowdown in demand as consumers held back on purchases. Later in the quarter, the market suffered as the lockdown took effect: demand in March slumped by between 60-80%”. The local gold price continued its upward trajectory and breached previous historical highs. According to a Reserve Bank of India (RBI) survey conducted across 13 cities between February 27 and March 7, 2020, although consumer confidence increased slightly in the first two months of the quarter, sentiment on the general economic situation, employment scenario and household income remained pessimistic. “While Q1 demand was hard hit, we expect the impact of COVID-19 to be more severe in the second quarter, as the lockdown extends into May. Although some branded retailers have reported increased interest in their online platforms, logistical issues imposed by lockdown measures have made it difficult to fulfil the orders they generate,” the WGC said.