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ICICI Bank sees prices strangle gold demand in 2008

ICICI Bank sees prices strangle gold demand in 2008
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First Published: Thu, May 29 2008. 05 15 PM IST
Updated: Thu, May 29 2008. 05 15 PM IST
Ruchira Singh / Reuters
Mumbai: ICICI Bank sees demand for gold slowing this year, but a brighter outlook for investment purchases may help retain its position in the market, a senior official said.
“With the kind of price rise we have seen, there has been a slowdown in terms of physical quantity being sold,” Shilpa Kumar, senior general manager - Global Markets Group at the bank, said in an interview.
ICICI Bank is one of the top five importers of gold in India in a market dominated by MMTC Ltd amd Scotia bank, according to the World Gold Council (WGC).
“It does look like this year, the quantum may be lower.”
The bank had about 20% market share in 2007, she said, when India imported 774 tonnes of gold according to WGC data.
Gold imports are down as prices rallied to touch an all-time of $1,030.80 an ounce in March, and bullish forecasts suggest the rest of the year may stay dull too, Kumar said.
ICICI forecast prices at the end of December at Rs12,400 per 10 grams in a Reuters poll in April. On Thursday, it quoted wholesale gold at Rs12,535, up 44% from a year ago.
“Part of the reason why we have sustained ourselves is our ability to provide services in so many places,” Kumar said. referring to the 22 locations from where it sells one kg bars and over 1,000 branches from where coins are retailed.
While wholesale gold sales took a hit this year, retail performed better maintaining the same level of sales as in the previous year, Kumar said.
“In gold coins, the big thing has been the competition... it has gone up more than two or three times,” said Kumar.
In 2007, coin sales were at 3 tonnes, same as the previous year, Kumar added.
Bigger Buys
“We are seeing gold as an investment and an asset class in a kind of packaged, disposable form as against a sentimental and emotional investment,” Kumar said.
Many individuals have been asking for one kg gold bars across counters in the past year or so, she added.
Gold for investment is a smaller segment of the market compared to jewellery, but has grown faster in the last few years. Traditionally, Indians have been buyers of jewellery.
In 2007 Indian investors bought nearly a third of the imported gold, WGC figures show.
In the year of dull demand, the bank is planning to consolidate its position.
“Now probably, the focus might be on consolidation,” she said, without giving specific targets.
“When there is a slow down we need to make sure that people focus on service and quality and that differentiates the stronger player in the industry.”
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First Published: Thu, May 29 2008. 05 15 PM IST