The World Gold Council estimates the consumer demand for gold to touch 1,200 tonnes, at a value of Rs 2.5 trillion, by 2020 – from 963 tonnes (Rs 1.7 trillion) in 2010, fuelled by GDP growth, rapid urbanisation, emergence of strong middle class, increased savings and income levels.

A study by the market development body titled “India: Heart of Gold” says Indian households hold the largest stock of gold in the world at 18,000 tonnes. Gold purchases in India accounted for 32 per cent of the global total in 2010.

“Last year, gold demand rose 70 per cent, despite multiple price highs in India,” says Mr Marcus Marcus Grubb, Managing Director – Investment, World Gold Council, releasing the study report. “The Indian wedding market will drive 500 tonnes of new gold demand per annum over the next 10 years and another 500 tonnes from gifting. Inflationary pressure is also likely to stimulate demand for gold as it is seen as a good hedge against inflation.”

In the next five years, gold demand is likely to touch a peak before seeing lower growth and a high again in the consequent five years.

However, there are challenges the industry needs to watch out for. Jewellers must focus on product development and evolution to cater to the modern and young investor, says Mr Grubb.

Short supply

Commenting on the reasons for gold price rise, Mr Grubb said globally there is a shortage of gold supply. High costs of production and low rate of mine production are other reasons.

Mr Ajay Mitra, Managing Director – Indian and Middle East, World Gold Council, says: “Indians tend to be risk averse and place great faith in the wealth preservation qualities of gold, which inspires confidence and security. Therefore, the view that Indian demand for gold will be driven by the concept of enduring value, not price.”

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