India reclaims leading position in gold consumption
Mumbai (Feb 2) India reclaimed its position as the leading consumer of gold in 2014 with an estimated 880 tonnes against the erstwhile leader China’s 866 tonnes.
An industry report by GFMS analysts at Thomson Reuters said that this was amidst global demand for gold declining 18.7 per cent in 2014.
Indian jewellery fabrication demand rose by 14 per cent to a record 690 tonnes in 2014 with most of the growth occurring during the third and fourth quarters of 2014 “as retailers restocked when local premia eased and gold prices fell.’’
The growth in demand was in contrast to the situation in the first half when retailers deferred large-scale buying due to high premia and less availability of gold within official channels. The easing of restrictions after May, 2014, boosted demand. “Consumption is estimated to have registered only single-digit growth last year and even that mostly occurred in the second half,’’ the report said.
The government’s decision to scrap the 80:20 rule in end-November, 2014, and remove restrictions that were in place since August, 2013, coincided with the seasonal weakness. Retailers focused on reducing excess stock that had been built up in anticipation of increased restrictions, which led to premia collapsing. Adding to the pressure was the offloading of unofficially imported gold as a brief rally in prices during December generated higher margins.
“We estimate that about 120 tonnes of gold emerged through cross-border smuggling for the whole of 2014, but this estimate is subject to revision,’’ the report said.
It expects 2015 to be the nadir for global annual average prices at $1,170 an ounce. “With price elastic buyers partially sidelined in 2014, we expect fresh pent-up demand later this year to give price support and start to reverse the prevailing bear market. For now, though, dollar strength and uncertainty over monetary policy will mean that cash remains king and this will put fresh pressure on gold in the first half of the year.’’