The Hindu Business Line : Gold demand mocks economic slowdown, hits record high

Mumbai, Nov. 19 Despite the global economic gloom, demand for gold in India registered the highest growth of 66 per cent at Rs 30,600 crore in the third quarter of 2008 as investors sought a safe haven and jewellery buyers returned to take advantage of softer gold prices.

Demand in West Asia, Indonesia and China was up more than 40 per cent while it was down 9 per cent and 5 per cent in US and UK (declines of more than 25 per cent in tonnage terms).

In tonnage terms, demand in India increased to 250 tonnes in the third quarter 2008 from 190 tonnes during the same period in 2007, an increase of 31 per cent. Jewellery demand was up 78 per cent to Rs 21,900 crore against Rs 12,300 crore, while in tonnage terms it rose 29 per cent to 178 tonnes, according to Gold Demand Trends, launched by World Gold Council (WGC).

BOOST FACTORS

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.

Purchases of gold bars and coins by retail investors amounted to 71 tonne against 53.3 tonne registered in the same period last year, a rise of 36 per cent. At Rs 8,700 crore the growth in value is 72 per cent against Rs 5,073 crore recorded last year.

In certain areas, supply of small bars for retail customers reportedly dried up in the face of such unprecedented demand.

Mr Ajay Mitra, Managing Director, World Gold Council, said: “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.”

RETAIL INITIATIVES

Retailers have taken initiatives to increase consumption by offering consumers gold accumulation plans (such as EMIs) and developing new modern designs to cater to the evolving consumer tastes, introduce gold to other retain formats like shop-in shop, kiosks and so on.

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 $10.7 billion (382 tonnes), double year earlier levels.

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