Since time immemorial, gold has been an asset every household prefers to invest in. This yellow metal is treated as a priced asset across India that is not just considered a status symbol but has great religious significance. Indian weddings and festivals are incomplete without gold. It is perceived as a source of traditional long-term returns.
However, with global climate change leading to unseasonal rains, floods and droughts, agriculture output is getting affected badly and this in turn has its sharp impact on gold buying, especially in rural India, which is the main agrarian belt of the nation.
According to World Gold Council (WGC), gold demand in India declined by 32 per cent to 123.9 tonnes in the third quarter (Q3) between July-September, 2019. Among various other reasons, monsoon played an important role in bringing down the demand.
The WGC’s 2019 gold demand estimate for India is 700-750 tonnes.
The spiraling price of the yellow metal, too, has acted as a dampener.
Sachin Kothari, Director, Augmont, explains there are two factors that has led to a slump in rural demand. He says, “Price surge is a cause of concern. There is a wait and watch situation prevailing in rural India, where people are waiting for the price to downgrade so that they can buy gold. Coupled with this, extreme unseasonal rains and floods have damaged output from these regions thus affecting the spending pattern of consumption. People are being cautious before indulging in investments.”
According to WGC, India’s Q3 2019 gold demand value was ₹41,297 crore, down by 18 per cent as compared to Q3 2018 (₹50,085 crore). The total jewellery demand in India for Q3 2019 dropped by 32 per cent at 101.6 tonne as compared to Q3 2018 (148.8 tonne).
This story is from the January 2020 edition of Outlook Money.
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This story is from the January 2020 edition of Outlook Money.
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