Gold demand is expected to revive in 2017 to 650-750 tonnes: WGC
MUMBAI: Gold demand in India is expected to revive in 2017 after touching to seven year lows in 2016, according to a global industry body, World Gold Council (WGC).
“Our view for 2017 is cautious. We expect consumers to buy between 650 tonnes and 750tonnes.” The demand in 2016 had fallen to 514 tonnes, the lowest since 2009. “Over time, we anticipate that economic growth and greater transparency within India’s gold market will push demand higher: by 2020 we see Indian consumers buying between 850tonnes and 950 tonnes,” the report said.
The report also cautioned that the ban on cash transactions over Rs 300,000 could hurt rural Indian demand while implementation of Goods and Services Tax (GST ) could adversely affect the industry in the short-term.
It also said that after falling so sharply last year, demand is unlikely to fall further. A banking system flush with liquidity, the bumper crop after a good monsoon, and central government employees’ and pensioners’ inflation-busting wage hike will all support economic growth.
GST is expected to streamline India’s tax structure which, as well as boosting the economy, promises to make gold’s value chain more transparent. Further ahead, the economy will benefit from young Indians entering the workforce – a demographic dividend similar to that which underpinned the stellar growth of the Asian Tiger economies of the 1980s and 1990s. All these factors will boost India’s economic growth and support gold demand, WGC said.
It is likely that the impact of demonetisation will have a behavioural impact too. The shock initiative will have tested some peoples’ faith in fiat currencies and reinforced their faith in gold.
Demonetisation is also boosting large jewellery retailers, and they will continue to grab a larger share of the market.
Over time, consumers will move away from cash towards digital payments, and organised players should benefit from this trend. This change in market dynamics will result in more transparency and a better deal for consumers, protecting them from shady practices such as under-carating, WGC said.
“Our view for 2017 is cautious. We expect consumers to buy between 650 tonnes and 750tonnes.” The demand in 2016 had fallen to 514 tonnes, the lowest since 2009. “Over time, we anticipate that economic growth and greater transparency within India’s gold market will push demand higher: by 2020 we see Indian consumers buying between 850tonnes and 950 tonnes,” the report said.
The report also cautioned that the ban on cash transactions over Rs 300,000 could hurt rural Indian demand while implementation of Goods and Services Tax (GST ) could adversely affect the industry in the short-term.
It also said that after falling so sharply last year, demand is unlikely to fall further. A banking system flush with liquidity, the bumper crop after a good monsoon, and central government employees’ and pensioners’ inflation-busting wage hike will all support economic growth.
GST is expected to streamline India’s tax structure which, as well as boosting the economy, promises to make gold’s value chain more transparent. Further ahead, the economy will benefit from young Indians entering the workforce – a demographic dividend similar to that which underpinned the stellar growth of the Asian Tiger economies of the 1980s and 1990s. All these factors will boost India’s economic growth and support gold demand, WGC said.
It is likely that the impact of demonetisation will have a behavioural impact too. The shock initiative will have tested some peoples’ faith in fiat currencies and reinforced their faith in gold.
Demonetisation is also boosting large jewellery retailers, and they will continue to grab a larger share of the market.
Over time, consumers will move away from cash towards digital payments, and organised players should benefit from this trend. This change in market dynamics will result in more transparency and a better deal for consumers, protecting them from shady practices such as under-carating, WGC said.
