Record surge in Indian gold demand

Gold demand in India jumped 37 per cent in the fourth quarter of 2010, a record.

Data compiled by the World Gold Council indicate total gold demand was 284.9 tonnes in the fourth quarter of calendar year 2010, as compared to 207.9 tonnes in the same period of the previous year.

Retail consumers continued to invest in gold jewellery despite higher prices. Jewellery demand shot up by 47 per cent at 210.5 tonnes, as against 143.1 tonnes in the comparable period of 2009.

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Backed by robust white collar investment in paper products like gold exchange-traded funds and increased portfolio re-adjustment by retail investors, overall investment demand rebounded in the fourth quarter of 2010 to 74.4 tonnes, as compared to 64.8 tonnes in the same period a year ago.

STILL GLITTERING Gold demand (in tonnes)
Year	Jewellery	Investment	Total
2001	597.7	104.3	702.0
2002	459.3	88.0	547.3
2003	441.7	86.3	528.0
2004	517.2	100.5	617.7
2005	584.5	134.9	719.4
2006	514.3	195.7	710.0
2007	551.7	217.5	769.2
2008	501.2	211.0	712.2
2009	442.4	136.1	578.5
2010	745.7	217.4	963.1

During the full calendar year, total gold demand in India jumped 66 per cent, on consumers' continued appetite for the yellow metal.

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"As indicated in the first month of the current calendar year also, gold demand is set to remain robust this year as well, in continuation of last year's trend," said Ajay Mitra, MD-India & Middle East, WGC.

For full calendar year 2010, demand rose 66 per cent in volume terms to a record 963.1 tonnes as against 578.5 tonnes in the previous year. In value terms, it rose 98 per cent to Rs 1,73,330 crore in 2010 as compared to Rs 87,430 crore in the previous year.

The demand was lenient in favour of jewellery and then suddenly rebounded towards the investment sector in the third quarter and continued so through the rest of the year.

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Jewellery demand during the calendar year rose 69 per cent to 745.7 tonnes from 442.4 tonnes in 2009, while investment demand surged 60 per cent to 217.4 tonnes from 136.1 tonnes.

Total gold imports during 2010 set a new record at 918 tonnes, as against 578 tonnes, in the previous year.

Global surge, too

Global gold demand in 2010 reached a 10-year high of 3,812.2 tonnes, up nine per cent over 2009, worth about $150 billion. This was mainly due to strong growth in jewellery demand, revival of the Indian market and strong Chinese demand.

Plus, there was a paradigm shift in the official sector, where central banks became net purchasers of gold for the first time in 21 years. WGC expects total gold demand to remain resilient over the coming quarter.

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India's share in world gold demand shot up by nine percentage points to 25 per cent in 2010 as against 16 per cent in 2009.

Mitra attributed the growth to consumers' continued affinity towards the yellow metal. The eastern emerging economies, led by India and China are re-aligning reserves in favour of gold, in place of the earlier skew towards currencies.

Most central banks in emerging economies have indicated they would love to have additional gold.

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Importantly, the European Central Bank has reduced appetite for gold sales.

This indicates gold is likely to remain a preferred investment option, despite higher prices.

Mitra forecast that prices might remain high this year on reduced supply. Scrap sales from retail consumers have also significantly declined, indicating that buyers are unwilling to release it despite high luring prices.

Total gold holding above ground was recorded at 165,000 tonnes and proven reserves below ground at 26,300 tonnes, as of December 2010.