The drop in consumption by the world’s second-biggest gold buyer could limit a rally in global prices, which hit a more than seven-year high earlier this month. The fall in demand could also narrow India’s trade deficit and support the faltering rupee.
India’s gold consumption in 2020 could fall as much as 50% from a year ago to the lowest level in nearly three decades as a nationwide lockdown has closed jewellery stores during key festivals and the wedding season.
The drop in consumption by the world’s second-biggest gold buyer could limit a rally in global prices, which hit a more than seven-year high earlier this month. The fall in demand could also narrow India’s trade deficit and support the faltering rupee.
“We have never seen such kind of demand destruction happening. Sales are zero during the lockdown,” N. Anantha Padmanaban, chairman of the All India Gem and Jewellery Domestic Council told Reuters.
He said India’s gold consumption in 2020 could fall to 350 tonnes to 400 tonnes, the lowest since 1991, and down from 690.4 tonnes in 2019.
India extended a lockdown on its 1.3 billion people until at least May 3 as the number of coronavirus cases exceeded 12,000.
Weddings, one of the biggest drivers of India’s gold purchases, usually happen in summer but this year they are postponed due to the lockdown, Padmanaban said, in a big setback for the jewellery industry. He hopes a return to some normality in a few months could revive demand by year end.
Religious festivals, such as Gudi Padwa and Akshaya Tritiya, also help to boost gold demand but this year people were confined to their homes during the festivals, Prithviraj Kothari, managing director of Mumbai-based bullion dealer RiddiSiddhi Bullions, said.
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