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India gold investment turns negative for first time

India gold investment turns negative for first time
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First Published: Thu, May 21 2009. 03 20 PM IST
Updated: Thu, May 21 2009. 03 20 PM IST
Singapore: Investors in India, the world’s largest gold consumer, sold 17 tonnes of bullion in the first quarter of 2009, marking its first disinvestment ever, while investment demand plunged more than 70% in Vietnam on import restrictions, industry data showed on Thursday.
China, the world’s second-largest consumer, saw demand for investment falling to 16.1 tonnes in the first quarter from 16.7 tonnes in the same period last year, according to the World Gold Council.
“In a trend that emerged across much of the non-Western world, retail investors in China chose, on balance, to take profit on holdings of gold bars and coins as prices returned to levels close to $1,000,” the WGC said in a report.
But jewellery demand rose 2.9% to 89.1 tonnes in the first quarter because of festive seasons such as Lunar New Year and Valentine’s Day as well as the country’s relatively strong economy despite the global economic downturn
Gold powered to an 11-month high above $1,000 an ounce on 20 February, not far from a record of $1,030.80 hit last March, as investors sought a safe haven from turmoil in the financial markets. Gold was at $940.40 an ounce on Thursday, up $3.30 from New York’s notional close.
India’s jewellery demand suffered because of high prices and a slowdown in the economy, with consumption falling 52% to 34.7 tonnes in the first quarter of this year.
“The first quarter of 2009 was an exceptional one for India as a ‘perfect storm´ of events resulted in the lowest quarterly demand for gold jewellery in at least 20 years, while retail investment demand turned negative for the first time on record.”
Profit taking by retail investors led to declines in investment, in addition to mounting stocks of scrap which encouraged wholesalers to export 20 tonnes of gold in the first quarter - the first time India has been an next exporter.
India’s gold imports fell 83% in the first quarter as higher prices and deteriorating domestic economic conditions dented consumer demand, the WGC said.
In Southeast Asia, investment demand in Vietmam dropped to 10.4 tonnes in the first quarter from 38.5 tonnes at the same period in 2008, when the country was Asia’s second-largest gold investor after India.
“I would think the drop is related to the import ban and also steady exports of gold bars, which have taken up much of the business,” said a dealer in Singapore, who deals with Vietnam.
“There are still no developments on the proposal to import gold,” he said.
Vietnam’s gold traders have sought permission from the central bank to import up to $600 million worth of gold, calling for an end to a year-long ban. Such move would raise demand for dollars to pay for the imports.
Vietnam exported $2.3 billion worth of gold in the January-March period, or about 70 tonnes, after the central bank took the unusual step of allowing a number of traders to export the precious metal after domestic prices fell below the world level, dealers said.
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First Published: Thu, May 21 2009. 03 20 PM IST
More Topics: Gold | Asia | WGC | Commodity | Investment |