Gold demand in the country declined by 70 percent during the April-June quarter. This is the first time in the last 11 years that demand for gold has fallen so much in any quarter.
Retail jewelry shops and factories remained closed during the lockdown in the country due to Covid-19, which hurt gold purchases. Not only this, due to increased risk in the market due to Covid-19, gold prices started running fast. The demand for jewelry in India stood at 44 tonnes in the June quarter, the weakest figure ever.
Unlike India, gold demand in China showed improvement during the June quarter. After slipping 52 percent in the March quarter, there was a decrease of 33 percent to 90.9 tons in the June quarter. The demand for gold in these two countries was low due to a huge hit on gold demand globally. Globally, the demand for gold for jewelry was halved to 251 tonnes in the June quarter. According to the data of the World Gold Council, gold demand in India was 63.7 tonnes in April-June. Before the Lehman crisis in 2009, gold demand in India stood at 40 tonnes. Since then, there has not been such a decrease in gold demand in India in any one quarter during the last 11 years. India imported only 11.6 tonnes of gold in the June quarter. Gold investment also fell by 56 percent to 19.8 tonnes in terms of investment.
Somasundaram PR, managing director (India), World Gold Council, said, "Gold demand in India fell to a record low of 63.7 tonnes in the April-June period due to the nationwide lockdown and high prices. Retail jewelry shops remained mostly closed during this period except for a few days. Overall, the June quarter was weak in India in terms of gold demand.
During the lockdown, online shopping saw a boom. The Gold Exchange Traded Fund (ETF) saw a spurt in the June quarter after being sluggish for the past several years. There has been a sharp rise in the purchase of digital gold, but it cannot be said too much in terms of weak gold demand.
Somasundaram said, "There was a slight rise in sales in some cities due to the relaxation of the lockdown. This is an indication that the demand for gold will pick up again after the Covid-19 outbreak is reduced or is over.
Forgiveness scheme will come for illegal gold
The Union Finance Ministry is considering bringing an amnesty scheme for illegal deposits of gold to the people to curb tax evasion and reduce dependence on imports. According to people familiar with the case, the government will ask people to disclose the tax of unaccounted gold with them to the authorities and pay tax on it. However, the proposal is at an early stage and the tax department has sought feedback from the officials concerned.
In 2015, the Narendra Modi government had planned to take out gold lying near people's homes and institutions to reduce spot demand for gold and dependence on imports. For this, the government provided an alternative investment in gold. But people reacted coldly to this. Sources said that under the proposed scheme, those who disclose their illicit gold would have to deposit the valid gold with the government for a few years after paying tax. The finance ministry could not be immediately contacted for information about this.
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