Gold consumption in India may drop to 26-year low. Blame covid, high prices1 min read . Updated: 30 Jul 2020, 02:30 PM IST
- Domestic gold prices include 12.5% import duty and 3% GST
- Gold prices in India have surged around 35% this year
India's gold demand in 2020 is expected to fall to the lowest level in 26 years as a surge in prices and the coronavirus crisis weigh on demand, the World Gold Council (WGC) said. "Fast rising gold prices could act as headwinds," said Somasundaram PR, the managing director of WGC's Indian operations.
Domestic gold prices have hit a record high above ₹53,000 per 10 gram in futures market, driven by a rally in global rates. So far this year, domestic gold prices are up over 35%.
Domestic gold prices include 12.5% import duty and 3% GST.
The weak demand in the first half could drag down India's gold consumption in 2020 to the lowest since 1994, when demand stood at 415 tonnes, Somasundaram said, adding that it is still difficult to provide an estimate for full-year demand as the coronavirus crisis is still unfolding.
India's gold consumption in the first half of 2020 plunged 56% on-year to 165.6 tonnes. Meanwhile, the coronavirus-triggered lockdown also slashed demand by 70% in the June quarter to 63.7 tonnes, the lowest in more than a decade, the WGC said in a report published on Thursday.
Analysts say that lower demand by the world's second-biggest bullion consumer could limit a rally in global prices, which hit a record high earlier this month but lower imports could reduce India's trade deficit and support the ailing rupee.
Local gold futures have jumped 35% so far this year after rising a quarter in 2019. (With Reuters Inputs)