Indians’ gold buying up 113% since 2007 despite record rates

Indians’ gold buying up 113% since 2007 despite record rates

Thrissur: Record gold prices have not curbed Indian investors’ appetite for the precious metal as a safe haven to park their funds amid volatility in equity markets, with a 113% jump in buying activity in January-November, 2010, vis-a-vis 2007 levels.

Gold is regarded as a safe option for people unwilling to invest in equity markets in the wake of the global financial crisis, besides volatile prices and vagaries in production.

Indians purchased 353 tonnes of gold till the end of November 2010, as against 168 tonnes in the whole of 2007 globally, in spite of ups and downs in production and price volatility, sources told PTI, quoting London-based ‘Gold Fields Mineral Services’ (GFMS).

In value terms, the country’s demand for gold went up to Rs1,13,302 crore from Rs53,196 crore, translating into a 113% increase.

There has also been a considerable increase in gold investments through exchange traded funds (ETFs). As far as India is concerned, the net value of gold investments through ETFs till October 2009 stood at Rs1,169 crore, compared to Rs312 crore in the corresponding period last year, they said.

ETFs had raked in Rs2,850 crore from 2.44 lakh investors till the end of September 2009, according to the Association of Mutual Funds in India.

In comparison, 1.47 lakh people had invested in gold through ETFs by the end of March this year, translating into a 65% increase in six months, they said.

Former UNO financial expert TS Anantharaman said the heightened investor interest in gold is the result of the global economic meltdown of 2008.

He attributed the sudden hike in gold prices to the US government’s quantitative easing policy and its consequent decision to pump $600 billion into the market ‘without productive backing’ by June next year. The main objective of pumping money into the market would be to bring down unemployment and increase general consumption to stabilize the economy, he said.

“Under the circumstances, investors will go for safe and secured instruments of investment like gold and hence, investing in gold will go up despite skyrocketing prices," he said.

Anto Alukkas, the managing director of Thrissur-headquartered Alukas Group, reportedly the world’s largest jewellery chain with over 100 shops in India and abroad, also attributed the spurt in gold investment to the global economic meltdown, uncertain economic situation in Europe and weakness of the US dollar.

Kedar Lakshmanan, a partner in Bhima and Brothers Jewellers, said consumption of gold in BRIC (Brazil, Russia, India and China) countries was on a steady uptrend in spite of the global economic meltdown.

“However, consumption in the European Union and USA has come down to a great extent," he said.

He said China’s consumption of gold has far exceeded the assessment of even the World Gold Council. The nation consumed 462 tonnes in 2009 and annual demand has increased by 13% on average over the past five years, he said.

Though China is the world’s largest bullion miner, it imported 209 tonnes in the first 10 months this year, he said.

“In the present global economic situation, gold is the best bet for safe investment and hence, the upward trend in price will continue about three to four years," he said

The managing director of century-old Kalyan Jewellers, T S Kalyana Raman, said the increasing trend of investment in gold was due to easy and immediate liquidity “anywhere and everywhere", besides the option to invest small amounts.

He noted that investment in share markets and real estate required huge amounts and lacked liquidity. “When share markets crashed and the real estate boom declined to rock bottom, it took a long time to recover," Raman said.

Meanwhile, according to World Council figures, there has been a 79% increase in demand in India, with consumption of 650.4 tonnes in the first nine months of 2010, compared to 363 tonnes in the same period last year.

Trade and gold manufacturing sources said India has become the largest contributor to world jewellery markets. There was a 36% rise in overseas gold shipments in the third quarter this year, with 184.5 tonnes of the precious metal transported to overseas markets in July-September 2010, as against 135.2 tonnes in the same period last year, they said.