Appetite for gold continues unabated

Ramnath subb

The Indian consumer’s insatiable appetite for gold continued unabated in 2010 when it remained the strongest growth market for it and total annual consumer demand for gold grew 66 per cent over the previous year at 963.1 tonnes (578.5 tonnes). According to figures released by the World Gold Council (WGC), in value terms, this shows demand went up 98 per cent to Rs 173,330 crore (Rs 87,430 crore) which comprised a doubling of jewellery demand to Rs 134,210 crore (Rs 74,570 crore) and investment demand going up 90 per cent to Rs 39,130 crore (Rs 21,740 crore).

During the fourth quarter of the year 2010, total consumer demand was at 284.9 tonnes (207.9 tonnes), up 37 per cent. Jewellery demand surged by 47 per cent to 210.5 tonnes in the fourth quarter boosted by the festive season and the widespread expectation among Indian consumers of the rise in gold prices and investment demand was up 15 per cent at 74.4 tonnes (64.8 tonnes).

With gold prices increasing on a regular basis, consumers now have adjusted their price expectations and are now watching for the next level where the yellow metal would reach, according to WGC.

Even during times of recession, gold prices increased at an average rate of 19.3 per cent in 2009 and 12.5 per cent in 2010. Over the last five years, India’s relationship with gold has become even more intense despite the sharp rise in gold prices. The report said that over the last 3 years, average annual investment in gold has been of the order of US $ 20 billion higher than that in Unit linked insurance plans (ULIPs) and substantially higher than that in equity linked mutual funds.

According to Ajay Mitra, managing director, Middle East and India, WGC, ``2010 has been a great year for gold and for its investors around the world, especially in India. With Inflation reaching record numbers and there being extreme volatility in the equity markets, gold is one option that has given investors something to cheer about. Given the very good returns and consistency of performance, Gold should be an integral part of all investment portfolios. Gold should be a well thought out decision for investors given the strengths that the yellow metal enjoys in comparison to other financial instruments.’’