When it comes to India, the over all demand seems to be going in only one direction: Up. With mother of all festivals — Diwali — fast approaching households are geared to go for the precious yellow metal in the coming days. Despite high prices, there is no let up in the gold buying though some shopkeepers feel that for some customers the high prices remain a dampener.
According to the World Gold Council (WGC) gold jewelry demand in India remained robust in the first six months of 2010. The volume of growth increased 67 percent to 272.5 tons as compared to 163 tons in H1 2009. India’s total demand for gold rose by 94 percent to 365 tons in H1 2010 as compared to 188.4 tons in H1 2009. In value terms, the country’s gold demand grew from Rs. 273 billion in H1, 2010, to INR 605 billion in the corresponding period a year ago. It is quantum jump of 122 percent.
All eyes are now on the much awaited festival — Diwali — in the first week of November. In India, it is traditional and considered auspicious to buy gold during Diwali.
With marriage season to follow immediately, the year holds great promise to the gold merchants. Gold is not only given as gifts in marriages but more importantly as dowry to brides by her parents as a “goodwill” gesture and security although the tradition is frowned by some.
“We wish the prices had not touched this high”, feels an executive at Bangalore’s Shubh Jewelers who claim to be the world’s largest manufacturer of 22-carat gold jewelry. He is bit worried that anticipated crowd rush has not yet begun.
A bit alarmed, the gold business houses have started bombarding with the advertisement of all kinds and luring the customers with discounts and gift vouchers. For example, Reliance Money Infrastructure Ltd (RMIL), a part of the Reliance Capital, announced the launch of gold coins with India Post logo.
They have set an ambitious target of selling 300 kg during the Diwali eve. The special promotional offer — open till Diwali — ensures 0.5 gram of gold coin free on every purchase of 10 grams.
However, not everyone agrees that 2010 would be that great as made out to be.
“In 2008, the gold in the first six months sold over 700 tons and therefore I can’t comment on how it will grow this year. Nonetheless, 2010 will be certainly better than 2009,” says Suresh Huda, President of the Bombay Bullion Association Limited, established in 1940 and currently celebrating its golden jubilee.
He also points out that though gold articles sell well during the festive season quite a few consumers are going for the silver items as gift package since not every one can afford gold at these prices.
“Also, there is some diversion to gold exchange traded funds (ETFs) as investment tool”, he says as companies hand out customary festival bonuses in cash. Nonetheless, gold remains an attractive proposition for millions of Indians.
The year 2010 also added its own charm as India bagged 38 gold medals and stood second in the list after Australia’s 74 medals in the recently concluded Common Wealth Games in New Delhi making gold much talked about subject in the country more than in any other year.
