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Love for Gold
Read the passages given below and answer the questions that follow them:
The Indian love for gold is losing its sheen with consumer demand for the yellow metal sinking to eight-year lows due to high and volatile prices, fragile sentiment among the rural population and stringent government policies.
Total consumer demand for gold fell 28% year-on-year (y-oy) to 194.8 tonnes in the third quarter (July-September or Q3) of 2016, the lowest for Q3, which usually sees good demand, since 2008, data with the World Gold Council (WGC) showed. Gold prices have zoomed by 30.7% so far in 2016.
Investment demand plunged 30% y-o-y, the third consecutive quarterly fall, to 40.1 tonnes. At just 100.7 tonnes, year-to-date demand for bars and coins is the lowest for 12 years, below even that of 2009 when the first quarter saw negative investment for the only time in the WGC time series. Gold imports nosedived 61% y-o-y to 118.1 tonnes on a gross basis in Q3 with the total supply of the yellow metal crashing 50% y-o-y to 140.8 tonnes.
“Investors, already reluctant to buy at such persistently high gold prices, were also put off by the government’s focus on curbing cash transactions,” WGC said. “Demand for gold bars was more greatly affected by the measures than that for gold coins, as cash remains one of the primary means of purchasing gold bars,” it said.
“We believe that the demand is deferred and people will soon adjust to the increase in price and begin purchasing. However, with 195 tonnes, Q3 has turned out the best quarter this year.
And considering the five-year average of 205 tonnes. The demand during Q3 is not all that bad,” said PR Somasundaram, MD, India, WGC. “There was general anxiety on increase in prices and tax issues, which led to a reduction in demand,” he said.
Consumers, however, cashed in on high prices by selling gold. Weak demand in India was compounded by the government’s focus on curbing cash transactions.
1. What has gone wrong with the Indian love for gold?
2. What was the percentage of fall in the third quarter of 2016?
3. What has been the investment demand in the three consecutive quarters of 2016?
4. How did the government’s focus on curbing cash transactions affect the investors?
5. How was the demand for the gold bars affected compared to that of the coins?
6. Is the demand during Q3 of 2016 is all that bad?
7. What did the general anxiety on increase in prices and tax issue lead to?
8. How did consumers cash in on high prices of gold?