Gold demand fell 20% to around Rs.51,000 crore during the April-June quarter as households postponed purchases in the wake of high prices. This is the second straight quarter of falling sales, a rarity in India given that the precious metal is seen as the safest investment option, more so during times of stock market volatility and economic uncertainty.
But high inflation, which has resulted in higher consumption spending, at a time when pay hikes have been modest added to negative sentiment.
“Fluctuations in exchange rate and rise in gold price to records of around Rs.30,000 per 10 gram in June were compounded by inflation and concerns over a weak monsoon,” the World Gold Council said. With nearly 60% of sales in India in rural areas and small towns, a weak monsoon will cause a further dent in the months ahead.