Covid, price rise impact: Indian gold demand hits 26-year low in 2020, says WGC

India’s gold demand crashed to its lowest in 26 years in 2020 to 446.4 tonne, thanks to the Covid-19 pandemic and a rise in the precious metal prices, the World Gold Council (WGC) said on Thursday. But consumption is expected to rebound in 2021, as pent-up demand and higher economic growth will likely improve sales, it added.

Demand plunged 35% in 2020 from a year before to 446.4 tonne, the lowest since 1994 and worse than a 28% decline globally, the WGC said. A Covid-induced lockdown hit not just demand but even supply in the country, analysts have said.

Of course, in value term, the demand dropped at a much slower rate of 14% in 2020 to `1.88 lakh crore, as domestic gold prices hit record levels.

However, during the December quarter, demand somewhat recovered and dropped by only 4% from a year before to 186.2 tonne, showed the WGC data.

Somasundaram PR, managing director (India ) at the WGC, said: “As lockdowns eased and normalisation efforts were phased in, imports in the December quarter rose 19% year-on-year, pointing to the positive impact of pent-up demand. This can be expected to continue into 2021.”

He said the festive period and the ensuing wedding season revived hopes and drew in jewellery demand worth 137.3 tonne in the October-December period — the strongest quarter in the year. Investment demand also showed significant resilience, growing 8% to 48.9 tonne during the quarter.

Several agencies have predicted a strong rebound in India’s economic growth next fiscal. The International Monetary Fund this week forecast as much as 11.5% economic expansion for the country in FY22.

Total jewellery demand in 2020 was down by 42% at 315.9 tonne, while investment demand dropped 11% at 130.4 tonne. Total gold recycled in India last year was 95.5 tonne, compared with 119.5 tonne in 2019, the WGC data showed.