The Hindu Business Line : Gold demand slumped in Q4 last year on higher prices

Of the total demand of 773.6 tonnes in 2007, 558.2 tonnes came from the jewellery sector (higher by 6 per cent), while the retail investment was at 215.4 tonnes (a surge of 10 per cent), according to tonnage figures compiled for the WGC by GFMS Ltd, a London-based precious metals consultancy.

Though only up 7 per cent from the year 2006, the annual demand has more than doubled since 2004. The total annual demand in 2007 in tonnage terms also almost matched the demand peak of 774.4 tonnes reached in 1998. Although the average annual price in 2007 was significantly higher at Rs 9,225 per 10 gm compared with the 1998 average of under Rs 4,000 per 10 gm.

Though the first half of 2007 witnessed a 59 per cent surge in demand, the deceleration in demand from the third quarter was due to sharp increase in the price. Thus, the fourth quarter saw a slump in demand by 64 per cent at 83.9 tonnes from the same period a year ago.

According to the report, higher prices of gold are encouraging investment demand for the yellow metal and the purchases have been more price elastic. Gold is reported to have generated returns of around 16 per cent in rupee terms last year.

The robust Indian economy and buoyant stock market are the reasons attributed for the rise in demand in the earlier part of year even as the metals price went beyond Rs 9,000 per 10 gm.

Production of zari (gold thread used in saris) suffered a significant fall used in wedding saris on account of the high and volatile prices from September onwards. The impact of this can bee seen in the fourth quarter demand from the global industrial application and decorative use of gold, which slid 13 per cent year-on-year to 21.2 tonnes.

The global demand for gold at 3,547 tonnes last year was 4 per cent higher than in 2006. The total dollar demand for gold was reported at US $ 79 billion last year.

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