GST, anti-money laundering law in India hit gold demand in third quarter of 2017, says WGC

The recently introduced Goods & Services Tax (GST) and measures like anti-money laundering legislation (AML) around jewellery retail transactions deterred Indian gold buyers in the third quarter of 2017. After three consecutive quarters of growth, gold demand in India was down 24 percent year-on-year (yoy) to 146 tonnes (192.8 tonnes in Q3 2016). Value wise, Q3 gold demand in 2017 was worth Rs 38,540 crore, down by 30 percent, revealed the data released today by the World Gold Council (WCG).

Jewellery demand fell by 25 percent to 115 tonnes in Q3 compared to 152.7 tonnes in the previous year. The value of jewellery demand was Rs 30,340 crores, down by 31% from Q3 2016 (Rs.43,880 crore). Bar and coin demand also fell by 23 percent to 31 tonnes.

"The drop can be attributed partly to some advance buying in Q2 to pre-empt the introduction of GST in Q3. However, with the industry's gradual transition to GST proceeding on expected lines, and the removal of AML legislation, demand during the festive season seems to show clear signs of recovery in the last quarter" said Somasundaram PR, Managing Director, India, World Gold Council.

The fall is also underpinned by the faster growth in imports ahead of demand, and price factors in the market, he said.

WGC, which tracks gold sales at wholesale level, said it expects full year demand in 2017 to be well below the 5-year average, likely  between 650 to 750 tonnes; the lower end of the range being more likely.

In the first three quarters of this year, consumer demand for jewellery was 349.9 tonnes, an 8 percent growth over the previous year. Investment demand in gold also was high by 4.7 percent to 104.6 tonnes. In the January to June period of 2017, gold demand had increased 30 percent by volume and 28.6 percent by value terms to 298.4 tonnes worth Rs 43,600 crore, from 229.4 tonnes worth Rs 33,090 crore in the first six months of 2016.

For the second quarter of April to June, volume (126.7 tonnes) growth was 41 percent and 36 percent in terms of value for jewellery worth Rs 33,000 crore. Gold investment in the form of bars, coins etc. also grew by 21 percent in value terms during the quarter. Industry sources estimate the Akhstya Tritiya festival during the second quarter sales in this year were higher by a record 30 percent, coinciding with a dip in global gold prices.