India’s 2020 gold demand may hit 26-year low

India’s gold demand in 2020 is expected to fall to the lowest level in 26 years with domestic bullion prices hitting a record high and as falling disposable incomes could curtail retail purchases, the World Gold Council (WGC) said on Thursday.

Lower demand by the world’s second-biggest bullion consumer could limit a rally in global prices, which hit a record high earlier this month, although it could also reduce India’s trade deficit and support the ailing rupee.

“Fast rising gold prices could act as headwinds,” said Somasundaram PR, the managing director of WGC’s Indian operations.

Local gold futures have jumped 35% so far this year after rising a quarter in 2019.

India’s gold consumption in the first half of 2020 plunged 56% on-year to 165.6 tonnes. Meanwhile, the coronavirus-triggered lockdown also slashed demand by 70% in the June quarter to 63.7 tonnes, the lowest in more than a decade, the WGC said in a report published on Thursday.

Millions of Indians have lost their jobs or taken a pay cut after the country imposed a lockdown on its 1.3 billion people to curb the spread of the virus that has infected more than 1.5 million Indians.

Consumption is generally high during the June quarter due to weddings and key festivals such as Akshaya Tritiya, but lockdown restrictions kept shoppers indoors this year.

The weak demand in the first half could drag down India’s gold consumption in 2020 to the lowest since 1994, when demand stood at 415 tonnes, Somasundaram said, adding that it is still difficult to provide an estimate for full-year demand as the coronavirus crisis is still unfolding.

“Indian demand has previously jumped as much as 300 tonnes in a quarter. Latent demand could come out in the second half,” Somasundaram said.

Meanwhile, gold fell on Thursday as the dollar stalled its slide, with analysts saying bullion may face more resistance in its bid to breach the $2,000 level.

Spot gold was 1.0% lower at $1,951.42 per ounce by 1220 GMT, having earlier fallen as much as 1.3% to $1,944.76.

US gold futures eased 0.4% to $1,946.50.

The dollar found some support after the US Federal Reserve in a policy update offered no real clues about its next moves beyond a reiteration of its easy monetary stance.

Dollar bears had speculated the Fed might loosen its approach to inflation.

“Post-FOMC we are getting a little bit of a better bid on the dollar, although its still pretty much on its knees, and because of that we’ve seen a bit of correction in gold,” said Afshin Nabavi, senior vice president at precious metals trader MKS SA.

Gold jumped to near a record high on Wednesday after the Fed pledged to keep interest rates near zero. But initial gains in equities led by Wall Street overnight, and now a bounce in rival safe-haven the dollar - making gold less attractive to holders of other currencies - cut short the climb.

But the non-yielding metal, which benefits from low interest rates and is considered insurance against currency debasement and high inflation, is still up over 28% this year, supported by strong investment demand from Europe and North America, which has offset weak physical consumption in top Asian hubs.

“The macro environment is still quite friendly for gold - there’s plenty of geopolitical risks and the monetary accommodation is still very significant across many central banks,” Bank of China International analyst Xiao Fu said.

“It’s just that $2,000 is very strong psychological resistance level and people are a bit nervous about gold’s valuation.” Prices may test support at $1,943 per ounce, said Reuters technical analyst Wang Tao.

Other metals were also lower, with silver shedding 4.3% to stand at $23.37 per ounce, platinum down 1.7% to $908.87 and palladium off 4.4% at $2,063.41.

Separately, gold miner Anglogold Ashanti’s Chief Executive Kelvin Dushnisky will step down on Sept. 1, the company said on Thursday, citing family reasons for his departure after just two years in the role.

Chief Financial Officer Christine Ramon has been appointed interim CEO while the board searches for a replacement, the company said in a statement.

“I would like to thank Kelvin for his role in advancing our strategy, and wish him the very best for the future,” Anglogold Ashanti Chairman Sipho Pityana said in a statement.

Dushnisky, who was previously president at Barrick gold where he had worked since 2002, has been based in Johannesburg since becoming CEO of Anglogold Ashanti but his family has remained in Toronto, requiring frequent back and forth which has become difficult since the COVID-19 pandemic.

Agencies