Commodity Research Report 17 August 2015 Ways2Capital

INDORE, India - Aug. 17, 2015 - PRLog -- MCX - WEEKLY NEWS LETTERS

INTERNATIONAL NEWS

✍ DOMESTIC DEMAND DROPPED OF GOLD

Consumer demand in India for gold had dropped by 25 per cent during the calendar year’s second quarter (April-June) to 154.5 tonnes, from 204.9 tonnes a year before.In dollar terms, says the World Gold Council (WGC), it dropped by 30 per cent to $5.9 billion during the quarter as compared to $8.5 bn a year before. The demand forecast is 900-1,000 tonnes in 2015 (calendar year) as compared to 841 tonnes in 2014.

The fall in China’s consumer demand during the quarter from a year before was only five per cent.Looking ahead, there are encouraging signs in moving into what are traditionally the busiest quarters for gold buying in India and China.

China has remained much ahead of India in terms of gold demand. In the June quarter, it was 230 tonnes, compared to 154.5 tonnes. Till 2012, China was trailing India.Extreme weather patterns overshadowed rural demand in the quarter, which had a direct impact on incomes among the rural population (more than half of India’s demand).

Smuggling was 175 tonnes last year and would be lower this year, substantially due to better enforcement, demand not driving towards a huge premium and official supplies (enough importers) also available.
Jewelry demand at some high-end, branded chain stores in larger cities saw modest growth. This contrasted with sizable losses suffered by small, independent jewelers in Tier-II and Tier-III cities.

During April–June, jewelry retailer Titan declared it had been one of the toughest quarters for the company, as sentiment was so weak. Jewelry sales volumes dropped by 10 per cent year-on-year. Their Gold plus range, designed for ‘semi-urban and rural customers, was one of the poorest performing, with sales value down 24 per cent over a year.

While wedding-related demand was affected, An interesting trend is the rapid growth of door (a semi-pure alloy of gold and silver, usually created at the mine site and then transported to a refinery for further purification) as a proportion of imports; this element grew five-fold, from 9.2 tonnes in Q2 of 2014 to 55.8 tonnes. This might have been driven by refiners actively seeking out supplies of door, to make the most of the difference between duties on these and bullion imports. In any case, the groundswell of these imports have contributed to the inventory overhang.

Indian jewelry demand over these six months declined a modest seven tonnes from a year before. With Diwali heralding the onset of the wedding season in mid-November, prospects for the year's second half are supportive, particularly with the local price having dropped

substantially in recent weeks. Investment demand in India is, however, at a six-year low. Despite reasonable levels of interest around Akshaya Tritiya in April, this demand contracted for a third quarter in a row, declining 30 per cent to 36.5 tonnes.

Uncertain price expectations were a factor, as was the stock market, which has continued to capture the attention of investors with its continued strong performance. The weak rural economy played a further role. Those rural investors most affected by the Q1 rains were more inclined to sell gold to supplement declining incomes than make fresh purchases.


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