After falling in 2019, the Covid-19 pandemic hit worldwide gold output hard in 2020, with the suspension of development projects and contractions from mines nearing closure adding to the drop. Overall, output dropped by 5.2 percent to 108 million ounces (Moz).
Covid-19 had the greatest impact on gold production in the first half of 2020 when six of the top ten gold miners reported a combined 8.4% reduction in output from the previous year. Barrick (12.3 percent), Newcrest (15 percent), and Agnico Eagle also saw significant decreases (8.4 percent ). Kirkland Gold (48 percent), which acquired the Detour Lake project from Detour Gold Corp. in January 2020, and Zijin Gold (48 percent) were key contributors offsetting the decreases (5.9 percent ).
While in India, during a series of festivals that conclude with Diwali, or the Festival of Lights, Indians often increase their purchases of gold jewelry for weddings, and also buy coins and bars for investment.
Wedding invitations have been sent, and the festival season promises to be exciting. That’s excellent news for India’s gold jewelers because a halt in the pandemic means they’ll be able to recoup their losses during their most lucrative selling season.
However, throughout the pandemic, they have mostly held off on purchasing gold since prices have risen and limitations on travel have devastated the economy, delaying marriages and muting festivities. Daily infection counts are already at seven-month lows, and rising vaccination rates are increasing hopes for a healthier holiday shopping season.
Due to a 17 percent drop in gold prices in local markets from their record high last August, jewelers are optimistic that sales volumes will increase, as the precious metal’s safe-haven value wanes amid a worldwide economic recovery from the epidemic.
Jewelry accounts for 60 percent to 70 percent of India’s gold consumption. According to data from the World Gold Council, Indians purchased 315.9 tonnes of gold-use jewelry in 2020, nearly equaling the combined sales in the Americas, Europe, and the Middle East. With 433.3 tonnes, China is the largest customer.
According to Ashish Pethe, head of the All India Gem and Jewellery Domestic Council, pent-up demand and reduced prices might boost fourth-quarter gold sales by up to 15% over the same period two years ago.
According to World Gold Council data, Indians purchased 194.3 tonnes of gold during the October-December festival season this year, compared to 186.2 tonnes during the same period the previous year.
“The year 2020 was an exception/’, according to Pethe, “This quarter, gold prices have mellowed and are beneficial; weddings are also in high demand.”
Bullion hit a new high last year as a result of central banks’ huge stimulus efforts during the pandemic, which prompted a rush of money into exchange-traded funds. Investor appetite for gold is dwindling as the Federal Reserve indicates it may begin to reduce asset purchases.
“In the absence of significant investor interest, the physical market will determine the floor,” Standard Chartered Plc analyst Suki Cooper said. “Recent trade data suggests that major hubs are reacting to recent gold price decreases,” she explained. India’s bullion imports have also increased, she said, with pent-up demand high as the market approaches its peak buying season.
Indian gold purchases decreased across the board last year, not only during the festival season. According to Chirag Sheth, a consultant with Metals Focus Ltd, after falling to a more than the two-decade low of 446.4 tonnes in 2020, sales might climb by as much as 50% for the entire year of 2021.
Sheth stated that, “if prices remain where they are in the run-up to the festival season, then sales will be excellent,” even though possible safe-haven issues like as the oil crisis, which might lead to high inflation and have an impact on global GDP, could push up bullion prices.
If the covid 19 pandemic does not strike India again and everything remains in control, the gold market would undoubtedly rise fast, benefiting jewellers.