The Hindu Business Line : Q1 Indian retail investment in gold up

WGC findings Demand fell on sensitivity towards volatility. Individuals bought gold coins and small bars more. Consumers continuing to spend more money on gold,

Mumbai , May 24

Indian consumer demand for gold fell 27 per cent to 145 tonnes during the first quarter of 2006. "This was largely driven by the sensitivity of the Indian market toward price volatility," the World Gold Council (WGC) said. Jewellery demand reacted sharply to price volatility, falling by 38 per cent over the year-ago period that saw strong demand.

"Sentiment within India became increasingly attuned to the belief that gold prices would continue to rise, thereby providing some support to consumer demand in the jewellery market. Demand during the key festival of Akshaya Thrithiya, on April 30, appears to have been higher than in 2005," WGC said.

Two factors

Although demand fell, net retail investment in India grew by 32 per cent. This was on account of two factors — increased promotion by banks following the success of earlier WGC-assisted campaigns; and the general belief that prices will continue to rise. Individuals bought gold coins and small bars with the view of turning them into jewellery at a future date.

According to Mr Suresh Nair, Vice President of Kotak Commodity Services Ltd, "Investment demand is investment in gold bar. Predominantly they go in for gold bar and expect investment demand to pick up. Gold is an alternative asset class and a good hedge against inflation. We expect the price of gold to touch Rs 12,000 plus per 10 gm in the next 2-3 months."

Jewellery

Demand for gold in the first quarter of 2006 dropped by 16 per cent to 835 tonnes, due to a fall in jewellery demand, particularly in Asia, WGC said.

"Fall in jewellery demand is a normal and predictable reaction to a volatile gold price," it said.Despite price volatility in the first quarter of 2006 buyers spent more on gold than they did a year ago. There is higher interest from institutional investors, WGC said in a news release quoting its Chief Executive, Mr James Burton.

expenditure

"In jewellery markets as a whole, even though buyers in many countries tend to be susceptible to price volatility, consumers are continuing to spend more money on gold, even if they no longer get as much of it. This reinforces the positive attitude and buying intentions of consumers in these markets, and proves that despite price increases, gold jewellery demand remains robust,'' said WGC.

Institutional investment demand for gold remained strong in the first quarter of 2006.

ETFs

Exchange Traded Funds and similar products (ETFs) witnessed the largest quarterly increase in investment

"Offtake is likely to be supported by general positive consumer sentiment towards gold, rising incomes in key markets and by the increased desirability that the high price rise brings to the metal,'' WGC said.

More Stories on : Gold & Silver | Investments

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Monsoon onset window extended to next six days

EPFO awaits norms to invest in equity markets

DoT asks Tatas to put EVDO plans on hold

Dishman to buy Swiss co Solutia's unit

Reliance eyes cane processing

A different process

Maran for extension of STP scheme

Q1 Indian retail investment in gold up

Sensex sheds 250 points

FIIs vs MFs on the Sensex front

FIIs record $1.13 b sales in May

Few takers

Many IPO stocks reel under double-whammy