Major decline in India’s gold purchases

Mumbai: India’s gold purchase has seen a decline of 21% in gold purchase in the previous financial year. Despite being at worldwide leading position in the purchase of gold India purchased only 675.5 tons of gold in the year 2016. It has been clear that efforts taken for reducing gold imports, compulsion of PAN card for high value gold purchases, prolonged strike of gold and silver merchants in this period are the main reasons for decline in the purchase of gold in India. What is important is World Gold Council has declared that although the worldwide demand for gold has increased by 2%, gold purchase in India has significantly declined. 

Gold-councilIndia has been at a leading position for gold purchase worldwide. There has always been competition between India and China for securing lead position in the list of top gold purchaser countries. Indian tradition of buying gold especially during marriage and festivals as a safe investment option has led to continuous increase in India’s gold purchase index. However, experts from finance sector say that tradition of buying gold in India hampers the economy and that regulations are required for controlling import of gold. Government had also introduced Gold Monetization Scheme to reduce the gold purchase by citizens. 

Under these conditions, India had imported 857.2 tons of gold in the year 2015. In 2016, demand for gold has significantly reduced and India imported only 675.5 tons of gold. During this period demand for jewelry has also reduced in India. In 2015, 662.3 tons of jewelry was sold in India. In 2016, sale of jewelry declined by 22.4%.  Mr. P R Somasundaram, India Managing Director of World Gold Council informed that sale of 514 tons of gold jewelry was possible in this decline period.

In these circumstances, the turnover of gold jewelry declined by 12.3% in India. In 2015, there was a turnover of Rs. 1,58,310.4 crores from sale and purchase of gold jewelry. Comparatively in 2016, the turnover from gold jewelry was limited to Rs. 1,38,837.8 crores. According to World Gold Council, although the year 2016 was not conducive for gold purchase, there was a purchase of 244 tons gold in the last quarter which resulted in an increase of 3% in purchase of gold in India.  

Considering overall gold purchase in India, investors invested Rs. 46,517.3 crores for purchasing 194.9 tons of gold in 2016, India investors invested Rs. 43,647.5 crores for purchasing 161.5 tons of gold. World Gold Council expects purchase of 650-750 tons of gold in India in these circumstances.  

There was a purchase of 4,309 tons gold globally in 2016 in spite of decline in gold purchase in India.  In 2015, there was a sale of 4213 tons gold in world market.  In 2013 the rise in purchase of gold was due to increase in demand of ETF (Exchange Traded Funds) in USA and of gold bricks and coins in China, according to World Gold Council. 532 tons of gold was purchased for ETF. According to World Gold Council, demand for Gold based ETF and alternatively demand for gold has increased due to increasing global in stability and increasing economical insecurity. 

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