During the first six months of 2020, investors witnessed returns of 25% from gold. With other investment assets churning out very low returns, the precious metal became a safe haven for many last year.
With this in mind, let us dive deep into the major gold trends during the first six months of 2020 and how the Coronavirus affected the demand for the metal in India.
Drop in Jewellery Sales
India saw its jewellery consumption at just 109 tonnes during the first six months of the year. The consumption of jewellery was recorded at 180 tonnes during the same period in 2019.
Even the central banks had resisted the urge to purchase the yellow metal. Their purchase of bullion was around 40% lower than the 2019 level which was recorded at 233 tonnes.
The World Gold Council had said that the demand for jewellery during the first half of the year had halved to reach 572 tonnes in the world, owing to the pandemic. The demand for precious metals during the second quarter (April to June) of last year was just 251 tonnes.
Low Level of Imports
Every year, India imports between 800 tonnes and 900 tonnes of gold. However, statistics have shown that in April 2020, the figure was just 50 kilograms.
During the last six months of the year, the country had imported just about 100 tonnes of gold. We should, however, keep in mind that low gold imports are a good sign for India's Current Account Deficit.
|Month||Trend of gold imports|
Constant Gold Rates Spurts
March and April witnessed gold prices constantly reaching new heights. During the first week of August, international gold prices had reached $2,000 per ounce.
In India, the gold prices were reported between Rs.53,000 and Rs.54,000 per 10 grams. A lot of market experts and analysts had said that gold prices would reach Rs.55,000 by the time Dhanteras dawns on the country.
Increase in Demand for Gold Loans
COVID –19 had weakened economies all across the world and many people fell victim to joblessness. During this time, people were searching for various kinds of gold loans on Google. The gold loan lender, Muthoot Finance had reported a growth in its gold loan to Rs.41,611 crores by June 2020.
Boost in Sovereign Gold Bonds
India's demand for gold in August was pretty high when prices had reached Rs.5,334 per SGB. The subscription for the Series-V had reached 6,349.78 kilos at Rs.3,386.97 crores.
Record Inflow into ETFs
One catalyst for the appreciation of gold prices was ETF (Exchange-traded fun) activity. As currencies like the U.S. Dollar, Sterling, Renminbi, and Euro had weakened, it caused the U.S. dollar gold price to increase by 17% during the first six months of the year.
AMFI data had shown gold exchange-traded funds churning out more than Rs.3,500 crore in the first six months of the year in India. During the same period in 2019, the ETF market investors had seen Rs.160 crore being pulled out.