India, which is the largest gold market of the world, has decreased the demand for gold by a huge 83% to 17.7 tonnes from the year-ago period.
This comes after the record rupee prices due to the local units decrease against the dollar and a major deterioration in the domestic economy.
As per the figures released by the World Gold Council (WGC) in its first quarter of 2009, jewellery demand in India for the first quarter at 34.7 tonnes was the lowest quarterly demand in at least 20 years, while net retail investment turned negative (-17 tonnes).
Again in terms of rupee, gold rose high at an all-time high of Rs 15,780 per 10 gm in the Mumbai market on February 24 as the weaker rupee intensified high prices in international market.
The decrease in demand for gold jewellery and large scrap flows aided to thrust local gold prices to a discount below international prices. Thus, it provided a profitable opportunity for wholesalers, who became exporters of gold.
As a result, export in India became a significant 20 tonnes of gold during the quarter, the first time that India has turned a net exporter of gold. The second quarter demand is expected to improve due to a good buying on the occasion of Akshay Tritiya and a subsequent summer wedding season according to WGC.
But, the prices need to remain relatively stable and below their recent highs to support to the jewellery demand. The total demand for gold in the first quarter of 2009 increased 38% on a year-on-year basis to 1,016 tonnes as investors bought the yellow metal amidst fears of inflation and the prevailing financial uncertainty globally. The demand of Gold jewellery was down by 24% because of prices that were both high and volatile.
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