India's appetite for gold went up significantly in the July-September quarter, even as global demand for the precious metal fell to its lowest in nearly five years.
Gold demand rose 39 per cent to 225.1 tonne during the quarter, according to industry body, World Gold Council. In China, the other major buyer of gold, demand fell 37 per cent during the period on a year-on-year basis.
Here's why India is buying more gold:
1) Jewellery demand in the country went up by 60 per cent during the quarter, even as investment demand fell 10 per cent. Investment demand fell on softening prices and weak price outlook. "Price premiums in India declined sharply after supply pressures loosened as the RBI permitted trading houses to import gold again," the World Gold Council said.
2) Soon after the Narendra Modi-government was formed, the Reserve Bank of India (RBI) in May eased some import norms like allowing star trading houses and premium trading houses to import gold, who had been banned from doing so in 2013, to combat trade deficit. This led to an increase in supply in the domestic market, lowering prices in the process.
3) Softening of gold prices in rupee terms during the period also helped consumer sentiment, World Gold Council noted in its 'Gold Demand Trends' report.
4) The onset of the wedding season and festivals like Akshaya Tritiya, Dhanteras propelled the surge in gold demand during the quarter. Gold is considered an auspicious gift during festivals and forms an integral part of wedding jewellery. Wedding-related purchases were steady, notably among high-end retailers, the industry body said.
5) During the same quarter last year gold consumption was hit by curbs on imports. India had raised gold import duty to a record 10 per cent and made it mandatory to export one-fifth of all imports, in a bid to curtail high trade deficit.
(With inputs from Reuters)
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