According to WGC reports, the demand for the gold is unlikely to fall and Indian consumers are likely to buy between 650 tonnes and 750 tonnes of gold in 2017.
The industry body World Gold Council (WGC) on Wednesday said that the gold demand is improbable to decrease further from the current levels and large Jewellery retailers in the organised sector are likely to grab a larger market share in the coming days.
After the note ban of Rs.500, RS.1000 notes there is a reduction in the demand for gold said WGC.
“Demonetisation is also enhancing large jewellery retailers, and they will continue to grab a higher share of the market. Over time, customers will move away from cash towards digital payments, and organised players should value from this trend. This variation in market dynamics will result in more transparency and a better deal for customers, protecting them from shady practices such as under carating,” WGC said in its report.
In 2016, jewellers strike against excise duty and new rules making PAN card compulsory for purchases of gold above 2 lakh, coupled with higher prices and the demonetization directed to gold demand falling to a seven-year low.
In 2016, Indians consumed 675.5 tonnes of gold, 21 percent lower than the previous year.
According to WGC Reports, Indian customers are likely to buy between 650 tonnes and 750 tonnes of gold in 2017.
“While demand is likely to improve, our view for 2017 is wary: we expect the customers to buy between 650 tonnes and 750 tonnes. However, over time, we expect that economic growth and greater transparency within India’s gold market will push demand higher.
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The reports also say that, By 2020, the Indian consumers buying between 850 tonnes and 950 tonnes of Gold.”
“Headwinds will be offset by strong tailwinds. A banking system flush with liquidity, the bumper crop of a good monsoon and central government employees and pensioners’ inflation-busting salary hike will all provision economic growth and gold demand,” the industry body said on an optimistic note.
While the budget proposal putting a cap on cash transaction above Rs 3 lakh is estimated to hit sales in rural India where people do not necessarily have access to cheques and electronic payments, WGC believes that the gold retailers would buy smaller quantities spread over more transactions.
However, it also added that the restriction on high-value cash transactions could also drive a large part of demand underground and encourage growth in the black market.