It’s a new kind of gold rush in booming IndiaPublished: Thursday, 20 April, 2006, 11:50 AM Doha Time
SINGAPORE: In gold-crazy India, it’s now not just the housewives who are buying the metal to add to their jewellery collections. Their husbands, with an eye for long-term investment, are also joining the queue.
As gold surges to 25-year highs and outperforms many other assets, India’s appetite for gold bars is rising at a faster rate than the growth in jewellery demand, said Mukul Sonawala, president of the Bombay Bullion Association.
“A new breed of people is emerging in India where they are buying and holding gold in bullion form,� Sonawala said. “There is a clear shift towards that. It’s just not the housewife buying jewellery. We are seeing serious investors now.�
Jewellery accounts for the biggest chunk of India’s gold demand. Gold is often given by parents at weddings to give their daughters financial security. Hindus also consider gold an auspicious metal and like to buy or give it during religious festivals.
But thanks to India’s buoyant economy, a more affluent middle-class is keen to park surplus funds in bullion in the hope of better returns in the future, Sonawala said.
“If you hold in bullion form, you get back almost your entire money when you sell. But if you hold jewellery and try to sell it later, it’s tough to recover the making charge, which accounts for 30% of the price of jewellery.�
Sonawala said demand for bullion in the world’s biggest importing and consuming country has jumped by about 30% in the past six months. But growth in jewellery demand has not kept pace.
“When gold was at Rs6,000 per 10gm some time back, demand for bullion was not that great, compared to what it is now when it is at 9,000. And Rs10,000 is not far away. The mad rush is increasing with every increase in price,� he said.
“It’s clear that people are buying to hold for a long period. And bullion is a better option as there are a lot of other issues with jewellery — some go out of fashion and other things.�
And Sonawala said Indian investors who made money from the property and stock market boom in India in the first three months of the year are now shifting their interest to high-flying commodities, including gold.
The gold price has risen about 46% on world markets in the past 12 months on aggressive fund buying, record oil prices, instability in the dollar, and tensions in the Middle East. It’s currently trading at about $623 an ounce.
“With gold breaking $610, and looking at the current trend, $670 or $680 may also be possible,� Sonawala added, although he declined to give a time frame for the rise.
But before the market again rises sharply, there could be a correction, Sonawala said. “And that will be the opportunity to buy, although it will not fall a lot,� he added.
Despite the surge in prices, India’s appetite for gold is unlikely to ease. He said gold imports in 2006 could be 10 to 12% higher than last year’s 760 tonnes.
India, home to more than 1bn people, imports more than two-thirds of its annual gold needs. – Reuters
