India beats China, becomes biggest gold consumer

India's jewellery consumption in Sept quarter increases 5% to 193 tonnes.

India regained its top position from China as the biggest overall consumer of gold in the first nine months of this year with a total consumption of 642 tonnes, a survey said.

China is trailing India by just 63 tonnes, according to the GFMS Gold Survey Q3 2015 Review and Outlook.

In India, jewellery consumption increased by five per cent year-on-year to an estimated 193 tonnes for the quarter ended September in 2015, the highest quarterly consumption since the March quarter of 2011 and the highest third quarter demand since 2008, the report published by Thomson Reuters stated.

The survey said, “Retail investment rose 30 per cent year-on-year to 55 tonnes, the highest since the fourth quarter of 2013.” Gains during the quarter were primarily attributed to a fall in domestic prices, which declined to the lowest since August 2011. Prices fell to Rs 25,000 for 10g in India.

GFMS said another factor that supported higher volumes during the quarter was a significant drop in the exchange of old jewellery for new.

Inward remittances from expatriates also influenced demand, as the rupee depreciated towards 67 to a dollar from 63.35 at the beginning of the year.

“Charting these sales trends shows family-run retailers turned out to be the first choice over national chains, in a falling-rupee price environment,” the survey said.

The survey said globally, the demand for physical gold rose seven per cent year-on-year in the September quarter, owing to an increase in net official sector buying and stellar retail purchases of bars and coins.

Jewellery fabrication, the largest consuming sector, was marginally lower year-on-year, as higher demand in India was offset by a slow recovery in Chinese off-take.

India tops China, becomes biggest gold consumer Overall, investors remained cautious, as uncertainty around the timing of an interest rate increase in the US continued to weigh on the sentiment.

The persistent lack of inflation and emerging market concern pushed back rate expectations, providing a temporary boost to gold prices.

On the future direction of prices, the survey said, “We expect gold to trade back below $1,100 an ounce in the fourth quarter of 2015, an annual average of $1,159 per oz in 2015. Gold is set to remain under pressure until there is more clarity on the timing and the scale of US rate normalisation. Among the bearish factors are low inflation expectations and the generally weak investor sentiment towards precious metals. That said, gold might draw some support from a seasonal uptick in physical demand towards the year-end; the prospects look brighter for next year.”