The Covid-19 pandemic has radically changed the landscape of the gold industry in India, the world’s second-largest consumer of this precious metal. Gold refineries in India have run out of raw materials to process. Covid-19 forced the closure of mines in South Africa, and Switzerland and even some mint facilities in the United States. The collapse of demand for the metal in India has caused the closure of at least half of the country’s precious metal refineries.
However, all these facilities returned to be active after a period of stoppage forced by restrictive measures. The situation surrounding refineries in India is more uncertain. Consumption patterns have changed in this country.
Half of India’s gold refineries, ten of the 20 that exist in the country, have been forced to close. This is because they are not receiving any dore bar to process from their usual suppliers (Switzerland, Ghana, and Peru).
The dore is the material created at the site of a mine and transported to a refinery for purification. Refineries process it to achieve the purity required for bullion manufacturing. Each dore bar contains between 50 and 75% pure gold.
Ten refineries have had to stop working with dore. But the problem is not the lack of supply from the mining operations. The demand for the metal has dropped in one of the world’s largest gold consumers, including China.
The demand for the precious metal has plunged in India
The metal’s demand plummeted by 36% in India in the first quarter of 2020, compared to the same period in 2019. The World Gold Council published this data.
Demand from the jewelry sector, one of the most important in terms of gold consumption in the country, fell 41% year-on-year. It dropped to 73.9 tons, to its lowest level in 11 years.
For its part, investment gold demand fell by 17% year-on-year to 28.1 tonnes. The total demand for gold in the first quarter of 2020 has been reduced to 102 tonnes compared to 159 in 2019.
The Association of Gold Refineries and Mint of India noted that the refineries have had to close because they have run out of dore to process. It is difficult to reverse the situation in the short term since the demand for gold has plummeted in India. Therefore, the accumulated stock is sufficient to satisfy domestic demand.
Multi Commodity Exchange of India has started to accept gold bars
Currently, the refineries that continue to operate have a new client. MCX, an independent commodity exchange based in India, has begun to accept gold bars from refineries to support their clients’ contracts.
To become suppliers for MCX, refineries must undergo a monitoring process that includes auditing their supply chain. Also, they ensure that the gold comes from responsible sources and demonstrates its refining capacity.
Until now, MCX only accepted numbered gold and silver bars from refineries certified by the London Bullion Market Association (LBMA), and those manufactured by Emirates Gold.
- Trading Instrument