MUMBAI: India's gold consumption in 2020 could drop as much as 50% from a year ago to the lowest level in nearly three decades, as a national closure has closed jewelry stores during key festivals and the wedding season.
The fall in consumption of the world's second largest gold buyer could limit a rebound in global prices, which peaked more than seven years earlier this month. Falling demand could also reduce India's trade deficit and support the weakness of the rupee.
“We have never seen a type of demand destruction of this type. Sales are zero at closing, "N Anantha Padmanaban, chairman of the National Jewelery and Jewelery Council of All India, told Reuters.
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He said that India's gold consumption in 2020 could drop from 350 tons to 400 tons, the lowest since 1991, and below 690.4 tons in 2019.
India extended a blockade to its 1.3 billion people until at least May 3, as the number of coronavirus cases exceeded 12,000.
Weddings, one of the main drivers of gold purchases, generally occur in the summer, but this year they are postponed due to the closure, Padmanaban said, in a major setback for the jewelry industry. He hopes that a return to normalcy in a few months can revive demand by the end of the year.
Religious festivals such as Gudi Padwa and Akshaya Tritiya also help increase demand for gold, but this year people were confined to their homes during the festivals, said Prithviraj Kothari, managing director of Mumbai-based bullion dealer RiddiSiddhi Bullions. .
The jewelry industry is also concerned about the slowdown in the economy, employment and wage cuts that could affect demand even after the blockade is lifted.
India is likely to record its worst growth performance in four decades this year due to the coronavirus outbreak, the World Bank said.
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Consumers shop for gold with disposable income, which could drop for millions of people involved in the unorganized sector, said Surendra Mehta, secretary of the India Bullion and Jewelers Association.
"People would try to buy the essentials after closing first, and eventually they'll think of luxury items like gold."
Even before the close, demand for gold was reeling in India and imports fell 55% in the March quarter due to record prices.
After rising 25% in 2019, local gold prices have increased another 20% so far this year, making gold expensive for millions of rural Indians, said Mangesh Devi, a jeweler in the state. Western Maharashtra.
The fall in consumption of the world's second largest gold buyer could limit a rebound in global prices, which peaked more than seven years earlier this month. Falling demand could also reduce India's trade deficit and support the weakness of the rupee.
“We have never seen a type of demand destruction of this type. Sales are zero at closing, "N Anantha Padmanaban, chairman of the National Jewelery and Jewelery Council of All India, told Reuters.
Coronavirus outbreak – live updates
He said that India's gold consumption in 2020 could drop from 350 tons to 400 tons, the lowest since 1991, and below 690.4 tons in 2019.
India extended a blockade to its 1.3 billion people until at least May 3, as the number of coronavirus cases exceeded 12,000.
Weddings, one of the main drivers of gold purchases, generally occur in the summer, but this year they are postponed due to the closure, Padmanaban said, in a major setback for the jewelry industry. He hopes that a return to normalcy in a few months can revive demand by the end of the year.
Religious festivals such as Gudi Padwa and Akshaya Tritiya also help increase demand for gold, but this year people were confined to their homes during the festivals, said Prithviraj Kothari, managing director of Mumbai-based bullion dealer RiddiSiddhi Bullions. .
The jewelry industry is also concerned about the slowdown in the economy, employment and wage cuts that could affect demand even after the blockade is lifted.
India is likely to record its worst growth performance in four decades this year due to the coronavirus outbreak, the World Bank said.
More about Covid-19
Coronavirus pandemic: full coverage
21-day closure: what will remain open and what will not
How to quarantine at home
Trust the newspaper for your verified daily news
Consumers shop for gold with disposable income, which could drop for millions of people involved in the unorganized sector, said Surendra Mehta, secretary of the India Bullion and Jewelers Association.
"People would try to buy the essentials after closing first, and eventually they'll think of luxury items like gold."
Even before the close, demand for gold was reeling in India and imports fell 55% in the March quarter due to record prices.
After rising 25% in 2019, local gold prices have increased another 20% so far this year, making gold expensive for millions of rural Indians, said Mangesh Devi, a jeweler in the state. Western Maharashtra.
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