Gold Silver Reports – No Lasting Impact of Demonetisation on Gold Consumption – Gold has long been the sump of cash in India. No wonder that gold demand plummeted in the post demonetisation months. But the demand soon bounced back to previous levels in a few months (see table).
Impact on demand
There seems to be no conclusive impact of demonetisation on gold. “It is very difficult to pin-point or quantify the impact that has happened due to demonetization. There were a lot of factors that were at play in the last 1 year. There has been the impact of GST (Goods and Services Tax), there was a 45-day strike by the jewellers and there was also the introduction—and then again roll-back of KYC (Know Your Customer norms) for gold purchases of over Rs50,000. So to exactly pinpoint the impact of demonetisation is really difficult and will also not be appropriate,” said Kishore Narne, head, commodities, Motilal Oswal Securities.
Impact on consumer Behaviour
However, there is at least some shift in consumer behaviour, and that is in the form of how people make the payments for gold. “Post demonetization, we are also seeing more customers shifting to the digital mode of payments,” said T.S. Kalyanaraman, chairman and managing director, Kalyan Jewellers.
Emergence of digital Gold
With the government’s push towards digital transactions, the market also saw the emergence of a new concept of digital gold.
Paytm launched its first digital gold product earlier this year and recently Motilal Oswal Securities Ltd has also started offering a similar product. Both Paytm and Motilal Oswal have tied up with MMTC-PAMP India Pvt. Ltd—a joint venture between PAMP SA Switzerland and MMTC Ltd, a Government of India undertaking—for physical storage of gold.
“It is not just digital gold, for every purchase made, real gold is put in a vault against your purchase. If you feel like having it physically, it is delivered to you,” Narne said.
It does look like the impact of demonetisation was temporary on gold demand but overall digitization of the country will impact the way people buy and store gold. – Neal Bhai Reports
