Gold demand in India fell sharply in the third quarter (July-September) due to tough regulations imposed by the government and fourth quarter demand is also likely to remain subdued compared to a year ago, the World Gold Council (WGC) said on Thursday.
In the third quarter, gold demand in India declined 32% year-on-year to 148.2 tonnes, while in value terms, demand fell 39% to Rs. 39,278.2 crore, WGC data showed.
Total investment demand was down 48% to 43.5 tonnes. In value terms, gold investment demand more than halved to Rs. 11,529 crore.
"Government supply curbs, volatile prices, inflation have hurt gold demand in India," Somasundaram PR, World Gold Council's India MD, said.
Although, gold demand in the fourth quarter is expected to have picked up compared with Q3, it will be still be lower than last year's Q4 figure of 262 tonnes, he said.
"Diwali and Dhanteras have not seen a runaway demand as anticipated …From the looks of it, all pointers are that Q4 demand will be lower year-on-year," Somasundaram added.
India hiked import duty on gold, and announced other measures like disallowing jewellers from buying gold on lease and imposed some restrictions on gold imports by nominated agencies, to curb its high current account deficit.
While the measures have helped curb demand in India, Chinese demand has accelerated even in the seasonally slow third quarter. Demand in China rose 18% to 209.6 tonnes, according to WGC.
Meanwhile, volatile gold prices, which surged to above Rs. 34,000 per 10 gm in September, and retailer promotions, boosted gold recycling in India, last quarter, WGC noted. Total gold recycled in India in Q3 was 61.3 tonnes, up from 34 tonnes in the year-ago quarter.
For the full year, WGC expects gold demand in India will end up slightly higher than 864 tonnes reported in 2012, as demand in the first half of this year was strong.