MUMBAI (Commodity Online): Even as the world is harping on the rising gold prices and investors rush to the yellow metal, there is one factor which is disturbing the analysts that demand for the gold in India has come down drastically in the third quarter of this year.

According to the World Gold Council, demand for gold in India has come down by 49 per cent the third quarter this year over the corresponding period last year.

“In India,...the exceptionally strong Q3 ’08 levels saw demand down by 49 per cent in Q3 ’09 comparisons” as high prices and a poor monsoon impacted on consumer spending and confidence, the WGC said in a press release.

Jewellery demand was also down by 42 per cent in the third quarter at 111.6 tonnes as compared to the year-ago period, it said. Net retail investment demand was two-third lower at 26 tonnes.

The third quarter demand was 26 per cent higher against the previous quarter, WGC said.

“Consumer and retail demand in India has been impacted by the high local price levels witnessed in this quarter. While consumers are still adjusting to a new, higher pricing environment, there is still wide-spread awareness about gold’s role as a store of value and as a result there is less distressed selling as consumers look to preserve their wealth in the face of ongoing economic uncertainty,” WGC said.

The total global gold demand for the third quarter 2009 reached 800.3 tonnes, or 24.7 billion dollar, which is up by 15 per cent from the second quarter, as gold’s long-term store of value and wealth preservation qualities continued to attract investors and consumers.

Jewellery and investment demand in non-western markets rebound from the low levels witnessed in the first quarter following recovery in industrial demand due to improvement in economic conditions, the statement said.

“Globally, this quarter’s demand trends demonstrate the diverse and robust nature of the gold market which underpins the gold price. Early signs of economic recovery and improving consumer confidence have seen jewellery and industrial demand rise relative to the last quarter, and profit taking witnessed earlier in the year has markedly decreased,” WGC said.

The figures, compiled independently by GFMS Limited for WGC, showed that the average gold prices for the quarter were 10 per cent higher than in Q3 ’08 at 960 dollar an ounce.

Jewellery demand was up 17 per cent quarter on quarter, due to seasonal factors, it said. However, the high local pricing environment resulted in a 30 per cent drop in jewellery demand relative to year earlier levels.
He said the levels of demand is likely to remain well supported by continued economic and currency uncertainty, inflation concerns and the search for diversification.

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