India’s gold demand at 675.5t in 2016, 21.2 per cent lower than 857.2t in the previous year. Demand by value declined 15 per cent to $27.2 billion in 2016 from $32 billion a year ago.

 “India’s gold demand for 2016 fell sharply, though the fourth quarter demand grew by 3 per cent to 244 tonne, due to softened gold prices that coincided with Diwali and wedding season. Demand was affected as the industry faced challenges, including PAN card requirement, Excise duty on jewellery, demonetisation and the publicity around income disclosure schemes,” WGC managing director, India, Somasundaram PR said.

Annual jewellery demand fell to a seven year low at a 2041.6t, while annual Indian jewellery demand ended 2016 down 22 per cent after a year of upheaval in the gold industry. The Indian jewellery industry experienced quite a turbulent year due to nation-wide jewellers strike followed by weak sales while the final blow came in the form of demonetization.

Demand for jewellery in India witnessed sharp decline of 22.4 per cent in 2016 at 514t compared to 662.3t in 2015.

Chinese jewellery demand declined further from its 2013 peak; tight supply conditions constrained the market in Q4. India and China – the two largest markets – together accounted for almost 80 per cent of the 347.0t decline in full year demand. India saw the biggest decline: the market faced challenges on several fronts.

Recycling in India was hit by the government’s shock demonetisation announcement, falling 36 per cent Y-O-Y and 67 per cent Q-O-Q in Q4. The liquidity crunch affected jewellers, who struggled to obtain cash to purchase gold from consumers, blocking a key recycling channel and resulting in a surge in gold-for-gold exchange. In East Asia, Q4 recycling was up 7 per cent Y-O-Y, but down 44 per cent from Q3 as the focus switched to buying gold ahead of the Chinese New Year (28th January).

Local Indian gold price was hardly hit by the cash crunch but the effect is likely to be temporary as healthy income and good monsoon will support the demand the gold forward. Somasundaram said, “We anticipate that 2017 will see a demand range of 650-750 tonne due to the introduction of the Goods and Services Tax (GST) coupled with gradual adaptation to the previous year’s policy changes.”