Commodity Online
NEW DELHI: There is no stopping the gold. If you want any proof for that just check out the World Gold Council data.
According to the council, total demand for gold in India, the world’s largest market for the metal, was up 84 per cent in tonnage terms in the fourth quarter of 2008 calendar year. In fact the jewellery demand was up 107 per cent.
As banks and large financial houses started selling gold to retail customers, Indian consumers invested more in gold in 2008. The WGC says 71% of the purchases was for jewellery and 29% for investment products such as gold bars and coins.
In calendar 2008, Indian retail consumers invested an all time Rs 88,056 crore on gold against Rs 71,761 crore in 2007, an increase of 22.7 per cent. About 71 per cent of this value went towards buying gold jewellery and 29 per cent towards investment products like bars and coins.
The last three months of 2008 saw global demand rise by 26% or 399 tonne, up from 141 tonne in the same quarter in 2007.
The gold demand may peter out if the economy recovers, as expected in the second half of this year. Prices would fall somewhat. Gold’s glitter has mesmerised people for thousands of years but it has never been so popular an investment asset as today.
In the 1980s and 1990s, gold lost some of its shine as financial markets developed and global central banks started selling their gold reserves.
This led its price to crash to roughly $250 an ounce and for three years from 1998, the return on gold was virtually zero. But the new millennium brought new developments. The 9/11 attack and Iraq war led investors to place their faith in gold. Its price started to rise.
In 2008, the global equity market’s collapse boosted gold prices. Other factors that helped were political tensions and volatility and an unprecedented rise in crude prices, which fuelled inflation.
As stock markets collapsed, the identifiable investment demand for gold, rose 64% higher than in 2007. It was equal to an additional inflow of $15 billion, said World Gold Council. In 2008 as a whole, the price of gold averaged $872, up 25% from $695 in 2007.
The biggest source of gold demand growth in during the quarter was investment with identifiable investment demand at 399 tonnes (141 tonnes), up 182 per cent with net retail investment up 396 per cent to 304 tonnes (61 tonnes) in the fourth quarter.
The most dramatic surge was in Europe, where demand for gold bars and coins increased manifold to 114 tonnes (nine tonnes). Exchange traded fund (ETFs) holdings broke new records and although net quarterly inflow was down, the growth rate was 18 per cent.
In the US, the deteriorating economic conditions produced a mixed result for demand with the fourth quarter jewellery demand down 35 per cent. In stark contrast, demand for gold bars and coins rocketed by 370 per cent to 35 tonnes.
