How is the Indian Gold Market Coping with the Challenges of COVID-19?
While 2020 saw gold jewellery demand hit a multi-decadal low, it also witnessed a stupendous increase in subscriptions to gold ETFs and Sovereign Gold Bonds in India. Last year also brought out the best in innovations and reforms. However, the situation is very different in 2021. Although this year began with a lot of optimism, a devastating second wave of COVID-19 at a time when industries are limping back is not welcome. In this article we focus on how this is expected to affect the Indian gold and jewellery industry.
COVID-19 First Wave: Jewellery Consumption Down But Gold Won
The first wave of COVID-19 had a devastating impact on gold jewellery consumption in India, pushing it to a multi-decadal low of 315.9 tonnes in 2020 against an annual average of 582.3 tonnes between 2015 and 2019 (Source: GDT, World Gold Council). However, 2020 reaffirmed Indian housewives’ belief in gold, as gold gained larger acceptance as a must-have asset class in any portfolio.
Gold-Backed Paper Products Grew Exponentially in 2020
2020 also saw increased acceptance of paper forms of gold in India, as these were convenient, accessible online and not limited by lockdown. For instance, Sovereign Gold Bonds (SGBs), a popular paper product issued by the Reserve Bank of India on behalf of the Government of India, witnessed an unprecedented subscription of 32,350kg through 12 issues during April 2020 to March 2021 alone, compared to 30,955kg subscribed over 37 issues between 2015 and March 2020.
Source: World Gold Council
THE FIRST WAVE OF COVID-19 HAD A DEVASTATING IMPACT ON GOLD JEWELLERY CONSUMPTION IN INDIA PUSHING IT TO A MULTI-DECADAL LOW OF 315.9 TONNES IN 2020
As of 31 March 2021, the total gold accumulated under SGBs was 63,307kg. Like-wise, Assets Under Management (AUM) of gold exchange-traded funds sky-rocketed to roughly US$2 billion as at the end of December 2020, as against about US$800 million as at the end December 2019, according to the Association of Mutual Funds of India.
Jewellery Manufacturing Went for a Major Overhaul
One of the positive developments of COVID-19 in 2020 was technology integration into gold jewellery manufacturing. Every aspect of manufacturing – generation of new concepts, creation of design, development of prototypes, approvals of final design, manufacturing through multiple remote centres, B2B exhibitions, negotiation and payments – moved online. Many of these developments would become the new norm going forward.
Jewellery Retailing (B2C) also Saw a Slew of Innovations
The impact of technology at the B2C level was palpable too. Electronic catalogues, virtual reality (VR) rooms, jewellery at your doorstep and e-commerce channels are some of the innovations that jewellers have adopted to retain existing customers as well as to attract new ones. Here again, the retailers that adopted these technologies have gained substantial advantage over the traditional players.
Source: Reserve Bank of India