Hot Trends in Indian Gold Buying
India, the largest gold consumer nation, represents the largest
share of world’s total jewellry demand (36%) and of world’s total
bar and coin investments (22%) in 2010, said World Gold Council
(WGC). In 2010 India imported a massive 958 tonnes of gold.
The world watches this giant barometer of gold demand as India
arrives at the strong season of gold buying which begins in late
August, the end of the monsoon, and in September, the start of
religious festivals including Diwali on 26 October, marking the
auspicious period to buy gold. Wedding season will begin in late
October until December when parents will buy gold for the brides. To
the nation, gold is not just a symbol of wealth but also an
expression of family security and stability.
In Q4 of 2010, WGC reported a surge of 47% in jewellry demand to
210.5 tonnes in India, compared to Q4 in 2009, not only because of
the festive season but also the expectation of higher prices,
signaling the strength of investment demand. Rajesh Mehta, chairman
of Rajesh Exports Ltd. expects purchases of gold jewelry, coins,
bars and medallions to climb 25% to 250 metric tons in the three
months ending 30 November this year.
Interestingly, the surge in local gold price since July coincided
with the 9% weakening of the Indian Rupee to its 2-year low against
the dollar at 47.925 and the dollar price of Indian gold dropping
about 5% from its peak to currently US$579 per 10 grams. The Rupee
weakness and higher local price may have hampered gold demand at the
beginning of the festivals. However, expectation that local prices
could climb to 30,000-32,000 Rupees (US$670) by the end of Diwali
has caused some panic buying of gold already in early August. With
the long term rising income level of the middle class, the continued
external uncertainty and the upcoming festivities, Indian consumers
would be expected to buy gold as soon as price stabilizes.
2011 promises to be a bumper gold buying year for Indians once
Sharps Pixley, London