India's gold demand to hit 3-decade low

India’s gold consumption in the current year could fall to nearly 50 per cent from its previous year’s level. This could be the lowest level in nearly three decades. The nationwide lockdown resulted in the closure of jewellery stores during key festivals as well as the wedding season. The drop in the consumption by the world’s second-biggest gold buyer could limit a rally in global prices. The fall in demand might also narrow India’s trade deficit and support rupee.

India extended the nationwide lockdown until May 3. Weddings are one of the biggest drivers of India’s gold purchases, which is usually planned in summer but this year, they have been postponed due to the lockdown. This is the biggest setback for the jewellery industry. Additionally, festivals such as Gudi Padwa and Akshaya Tritiya, also boost gold demand. However, since people were confined to their homes this year during these festivals, it ultimately led to a fall in its demand.

Slowing economy, job and pay cuts could further hit demand even after the lockdown is lifted. According to World Bank, India is likely to record its worst growth performance in four decades this year, due to Coronavirus outbreak.

Consumers make gold purchases with disposable income. There could be a fall in the disposable income for millions of people engaged in the unorganised sector. This would also have a serious impact on the demand of yellow metal after the lockdown.