India's demand for gold jewelry fell 30 percent in the second quarter from a year ago, according to a new report by the World Gold Council.
Gold jewelry demand which declined to 124.8 tonnes, is the largest way in which Indians invest in gold. And was down 14 percent from the five-year average.
Demand for total bar and coin investment was down 51 percent, and overall consumer demand was down 38 percent. The weakness in the rupee, poor monsoons, the government moves to curb gold imports, and the overall economic slowdown factored into the decline in demand for gold. From the WGC:
"A number of factors combined to create an un supportive environment for gold jewelry demand in India during the quarter. Slowing GDP growth; record high local gold prices caused by currency fluctuations; stubborn domestic inflation; high interest rates; and fears of a poor monsoon season, all contributed to the year-on-year fall in demand.
The price impact was the most prominent of these, with a wave of profit-taking prompted by the move in the gold price above Rs. 29,000, per 10 gram. The fluctuations in the exchange rate over the course of the quarter added to consumers' reluctance to buy jewelry as this fed through to gold price volatility."
This chart from the World Gold Council shows the dramatic decline in demand for gold jewelry:
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