India's gold demand fell nine per cent to 690.4 tonnes in 2019 from the previous calendar year as record domestic prices and economic slowdown dented retail purchase, the World Gold Council (WGC) said on Thursday.
However, in 2020, gold demand in India -- the world's second biggest consumer after China -- could increase to 700-800 tonnes on hopes of increased acceptance of high price level and likely economic reforms boosting consumer confidence.
The domestic gold price finished 2019 just above Rs39,000 per ten grams, almost 24% higher than at the end of 2018, WGC said in its latest report.
"As policy measures unfold, broader economic growth accelerates and local prices of the past six months become more acceptable among households, India's gold demand will be in the range of 700-800 tonnes in 2020," Somasundaram PR, Managing Director of WGC's India operations, told PTI.
The WGC expects policy-led and industry-led initiatives to bring a marked shift in making the industry more transparent and organised this year, he said.
Already, the government has made hallmarking (quality certification) mandatory on January 15, 2020 with a transition period of one year for the trade to sell or change its existing non-hallmarked inventory. This is an overdue reform and a positive step towards making the Indian gold more trustworthy, he said.
"These and other changes to follow are significantly positive for the long-term sustainability of demand, especially for the compliant and the organised sector," Somasundaram said.
However, short-term challenges remain as large sections of the industry compete on low margins and fear tax uncertainty, leaving little incentive for long term investments and modern trade practices, he said.
"India's average long-term gold demand is likely around 850 tonnes given its affinity to gold and economic and social context," he added.
In 2019, the WGC said India's gold demand in volume terms declined to 690.4 tonnes from 760.4 tonnes in 2018, out of which jewellery demand fell nine per cent to 544.6 tonnes from 598 tonnes, while bar and coins demand also dropped 10 per cent to 145.8 tonnes from 162.4 tonnes in the said period.
However in value terms, the country's gold demand rose three per cent to Rs 2,17,770 crore in 2019 from Rs 2,11,860 crore in the previous year.