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Festival Shopping Demand in India Could Trigger Gold Recovery in Q4

October 29, 2020

Despite gold prices falling by falling 30% in Q3, demand in India, in the form of jewellery purchases during festival time, is expected to trigger a recovery by the end of the year.

Somasundaram PR, the managing director of Indian operations for the World Gold Council (WGC) said on Thursday that:

“We expect quarter four would be better than quarter three due to pent-up demand and festivals”.

There is a common trend that the value of precious metal usually spikes towards the end of the year in India, as buying gold for weddings and major festivals such as Diwali and Dussehra. Indians celebrated Dussehra earlier this month and jewellers reported improvement in footfalls and sales, said Somasundaram.

Demand during Q4 is still likely to be lower than the 194.3 tonnes recorded last year as consumers are struggling to adjust to near record high prices he said.

India’s gold demand in the first three quarters fell 49% from the previous year to 252.4 tonnes as covid-19 lockdowns affected jewellery demand, the WGC said in a report published on Thursday.

In Q3, gold demand fell 30% from a year earlier to 86.6 tonnes as jewellery demand plunged 48% to 52.8 tonnes in the same period, the WGC said. While overall gold consumption fell, demand for coins and bars, known as investment demand, climbed 51% in Q3 as rising prices attracted investors, the WGC said.

“The slowdown in real estate and rising gold prices may have prompted unaccounted cash holders to move into gold,” it said.

Scrap gold supplies jumped to 41.5 tonnes in Q3, the highest in seven years, as record prices and pressure on household finances pushed consumers to liquidate their old trinkets and jewellery, according to the WGC.

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