Gold surge no deterrent for Indian consumers
MUMBAI: The price-conscious Indian consumer did not shy away from splurging on gold jewellery despite a 24% increase in the metals price in 2010 from a year ago, tipping the country to exhibit the strongest consumption recovery from the low levels of 2009, an industry body has said.
At the country level, India, the largest gold market, is poised to exhibit the strongest recovery during 2010, said the World Gold Council in its Gold Investment Demand digest for 2010. During the first nine months of 2010, gold jewellery consumption in India rose to 513.5 tonne, 73% higher than the same period during 2009, as consumers benefited from continued economic growth and periods of rupee appreciation against the US dollar.
The price of gold at the end of December was around Rs 1,960 a gm, up 23.9% from a year ago, while annualised volatility based on daily returns was 15.5%. The average price in 2010 was Rs 1,741 a gm, a 15% increase over the average price a year ago.
The volatility in gold was lower than that in equities or other commodities which is what increased the physical demand despite the year-on-year rise in price, said Ajay Mitra, managing director, India and Middle East, WGC.
Asked about any downside risk to the metal considering the correction under way since the beginning of the year, Mitra termed it a blip during the course of the year and what is being seen is physical demand has picked up considerably with retailers stocking up and consumers buying, a price-supportive factor. Many analysts, including GFMS, have forecast a price of $1,500 and above for gold this year.
However, Bhargav Vaidya, a precious metals analyst at chartered accountancy BN Vaidya & Associates, differs. As the global economic recovery gains traction, there is a risk that prices ma! y not ma intain the momentum we have seen so far. I dont think that prices this year will keep up the same momentum as last year. On the contrary, any rise will be above global inflation level of around 4%.
In Mumbai, gold has dipped by about 4.3% since the New Year to Rs 1,999 per gm on Tuesday, tracking overseas gold which has been on the retreat because of positive economic events in the US and containment of the euro crisis. While the final data on global jewellery demand in the fourth quarter of 2010 will be released in mid-February, indications are that India is likely to cross or match the 750-tonne record jewellery consumption of 2007.
China, the second-largest gold market, also benefited from healthy growth and renewed interest in gold consumption. While its 2010 performance so far has been less strong than India, it is worth noting that China was the only market that did not experience a contraction in jewellery consumption during 2009.
Net inflows into gold via exchange-traded funds (ETFs) and similar investment vehicles remained robust during 2010. The gold-backed ETFs that the WGC monitors saw net inflows of 361 tonne during 2010, the second largest on record after the 617 tonne net inflows experienced during 2009.
This brought total holdings to a new high of 2,167.4 tonne by December31, 2010, worth $98 billion at the year-end. In India, gold ETFs more than doubled during 2010 to approximately 15 tonne by the end of December, said a WGC official.
At the country level, India, the largest gold market, is poised to exhibit the strongest recovery during 2010, said the World Gold Council in its Gold Investment Demand digest for 2010. During the first nine months of 2010, gold jewellery consumption in India rose to 513.5 tonne, 73% higher than the same period during 2009, as consumers benefited from continued economic growth and periods of rupee appreciation against the US dollar.
The price of gold at the end of December was around Rs 1,960 a gm, up 23.9% from a year ago, while annualised volatility based on daily returns was 15.5%. The average price in 2010 was Rs 1,741 a gm, a 15% increase over the average price a year ago.
The volatility in gold was lower than that in equities or other commodities which is what increased the physical demand despite the year-on-year rise in price, said Ajay Mitra, managing director, India and Middle East, WGC.
Asked about any downside risk to the metal considering the correction under way since the beginning of the year, Mitra termed it a blip during the course of the year and what is being seen is physical demand has picked up considerably with retailers stocking up and consumers buying, a price-supportive factor. Many analysts, including GFMS, have forecast a price of $1,500 and above for gold this year.
However, Bhargav Vaidya, a precious metals analyst at chartered accountancy BN Vaidya & Associates, differs. As the global economic recovery gains traction, there is a risk that prices ma! y not ma intain the momentum we have seen so far. I dont think that prices this year will keep up the same momentum as last year. On the contrary, any rise will be above global inflation level of around 4%.
In Mumbai, gold has dipped by about 4.3% since the New Year to Rs 1,999 per gm on Tuesday, tracking overseas gold which has been on the retreat because of positive economic events in the US and containment of the euro crisis. While the final data on global jewellery demand in the fourth quarter of 2010 will be released in mid-February, indications are that India is likely to cross or match the 750-tonne record jewellery consumption of 2007.
China, the second-largest gold market, also benefited from healthy growth and renewed interest in gold consumption. While its 2010 performance so far has been less strong than India, it is worth noting that China was the only market that did not experience a contraction in jewellery consumption during 2009.
Net inflows into gold via exchange-traded funds (ETFs) and similar investment vehicles remained robust during 2010. The gold-backed ETFs that the WGC monitors saw net inflows of 361 tonne during 2010, the second largest on record after the 617 tonne net inflows experienced during 2009.
This brought total holdings to a new high of 2,167.4 tonne by December31, 2010, worth $98 billion at the year-end. In India, gold ETFs more than doubled during 2010 to approximately 15 tonne by the end of December, said a WGC official.
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