Mumbai: After witnessing a steep fall in demand for gold following the ban on high denomination currency notes, the industry body World Gold Council (WGC) on Wednesday said that the gold demand is unlikely to fall 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.
“Demonetisation is also boosting large jewellery retailers, and they will continue to grab a larger share of the market. Over time, consumers will move away from cash towards digital payments, and organised players should benefit from this trend. This change in market dynamics will result in more transparency and a better deal for consumers, protecting them from shady practices such as under carating,” WGC said in its report.
In 2016, a month-long jewellers strike against excise duty and new norms making PAN card mandatory for purchases above '2 lakh, coupled with higher prices and the note ban led to gold demand dropping to a seven-year low.
During the year, Indians consumed 675.5 tonnes of gold, 21 per cent lower than the previous year.
According to WGC, Indian consumers 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 cautious: we expect consumers to buy between 650 tonnes and 750 tonnes. However, over time, we anticipate that economic growth and greater transparency within India's gold market will push demand higher. By 2020, we see Indian consumers buying between 850 tonnes and 950 tonnes,” the report added.
“Headwinds will be offset by strong tailwinds. A banking system flush with liquidity, the bumper crop after a good monsoon and central government employees and pensioners’ inflation-busting wage hike will all support 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 expected to hit sales in rural India where people do not necessarily have access to cheques and electronic payments, WGC belie-ves that the gold shoppers would buy smaller quantities spread over more transactions.
However, it added that the curb on high value cash transactions could also push a large part of demand underground and encourage growth in the black market.
