Value Demand For Gold In India Reaches An All Time Record
-Study by World Gold Council
Demand for gold in India reached an all time quarterly record of Rs. 30,600cr in Q3 2008, a 66% increase vs Q3 2007 as investors sought a safe haven and jewellery buyers returned to the market to take advantage of softer gold prices. In tonnage terms demand increased to 250 tonnes in Q3 2008 from 190 tonnes in Q3 2007 which is a 31% increase.
According to Gold Demand Trends, launched today by World Gold Council (WGC), demand for gold jewellery in India reached 178 tonnes, a rise of 29% in tonnage over the same period in 2007, despite a deteriorating economic situation creating a greater squeeze on consumer spending. In currency terms this equated to a rise of 78%, from Rs.12,300 Cr to Rs.21,900 Cr.
After a sluggish start to the quarter, gold jewellery demand surged driven by rural economic boom, urban consumers wanting to safeguard their investments. Much of India experienced a good monsoon rainfall, which resulted in a ‘feel good’ factor boosting rural spending on gold during the festive season.
The data, compiled independently for WGC by GFMS Limited, shows investment demand for gold was similarly boosted by the pullback in the gold price during the third quarter. Purchases of gold bars and coins by retail investors amounted to 71.0 tonnes, the second highest quarter on record and equivalent to a rise of 36% over the 52.3 tonnes consumed in the third quarter of 2007. At Rs. 8,700Cr the growth in value is 72% vs prior year of Rs. 5,073 crs. In certain areas, supply of small bars for retail customers reportedly dried up in the face of such unprecedented demand.
Ajay Mitra, Managing Director, World Gold Council, commented:
“It has been an outstanding quarter for demand in India, the world’s largest consumer of gold.
I am encouraged by the fact that both investment demand in bars and coins and jewellery demand have surged against global credit crunch impacts our nation. Gold’s universal role as a store of value has shone through during this quarter helping attract investors and consumers to all forms of gold ownership.
“Looking forward, we believe the uncertainties in the financial markets will continue, therefore driving investors towards gold and its safe haven and insurance policy characteristics.”
Gold has held its value over the long term and is resilient to the effects of inflation. This cannot be said for many other consumer goods, which tend to lose their value and/or deteriorate over time.
Retailers nationally have taken initiatives to increase consumption by offering consumers gold accumulation plans (EMI) and developing new modern designs to cater to the evolving consumer tastes, introduce gold to other retain formats like shop-in shop, kiosks etc.
Globally, identifiable investment demand, which incorporates demand for gold through exchange traded funds (ETFs) and bars and coins, was the biggest contributor to overall demand during the quarter, up to US$10.7bn (382 tonnes), double year earlier levels.
Q3 saw a record US$18bn of consumer demand for gold jewellery around the world, with buyers returning to the market on lower price points, around and below US$800, demonstrating the underlying positive sentiment towards gold and its recognition as a store of value. The biggest contributor to the positive trend was India which witnessed a rise of 65% in US$ value or 40 tonnes relative to previous year levels, with the Middle East, Indonesia and China all enjoying rises of more than 40% in value or 10% in tonnage. There were however, strong declines in Western markets with the US down 9% in value and 29% in tonnes, and the UK down 5% in value and 26% in tonnes due to the overall decline in the retail market.
Industrial and dental demand declined to 104 tonnes during the quarter 11% down on year-earlier levels. Electronics, the largest component of industrial demand, was hampered by the downturn in the global economy and a lack of confidence within world markets.
Gold supply was down 9.7% on year-earlier levels, largely driven by a significant reduction in central bank sales. Sales under the Central Bank Gold Agreement (CBGA) totalled a provisional 357 tonnes in the CBGA year ending September 26, the lowest annual figure since the first Agreement was signed in 1999.
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