Despite the economic slowdown India’s consumption of gold in the third quarter saw an increase 31%. The yellow metal saw a surge in demand as investors sought a safe haven and jewellery buyers returned to the market to take advantage of softer gold prices. According to World Gold Council (WGC), gold saw 29% year-on-year rise in tonnage. In currency terms this equated to a rise of 78%, from Rs12,300 crore to Rs21,900 crore.
Initially the demand was sluggish, but rose rapidly driven by rural economic boom, urban consumers wanting to safeguard their investments. The good monsoon rainfall too boosted the rural spending on gold during the festive season, the report stated.
The demand for gold as investment rose due to the pullback in the gold price during the third quarter. Purchases of gold bars and coins by retail investors amounted to 71.0 tonnes, the second highest quarter on record and equivalent to a rise of 36% over the 52.3 tonnes consumed in the third quarter of 2007.
At Rs8,700Cr the growth in value is 72% vs prior year of Rs5,073 crore. In certain areas, supply of small bars for retail customers reportedly dried up in the face of such unprecedented demand.
Commenting about the increased demand Ajay Mitra, Managing Director, World Gold Council said, “It has been an outstanding quarter for demand in India, the world’s largest consumer of gold. I am encouraged by the fact that both investment demand in bars and coins and jewellery demand have surged against global credit crunch impacts our nation. Gold’s universal role as a store of value has shone through during this quarter helping attract investors and consumers to all forms of gold ownership.”
“Looking forward, we believe the uncertainties in the financial markets will continue, therefore driving investors towards gold and its safe haven and insurance policy characteristic,” he added.