Demand for gold in India is likely to fall by 16 per cent this year as high prices makes it less attractive for investment, Morgan Stanley today said in a report.
"Gold appetite in India seems to be waning as prices are too high. India's gold demand is likely to fall by 16 per cent in 2011 (over last year)," the firm's survey based on interviews with over 1,600 chief wage earners from middle and high-income households across urban India revealed.
Even though gold has been the best-performing asset class over the past several years, property is still ranked ahead of the yellow metal as a long-term investment, the global financial services firm said in a statement.
The report stated Indians are reluctant to sell gold and consider doing so only in a severe financial crunch and the attitude holds good even while taking loans against gold.
The survey highlighted that in India during bad times investors first liquidate equities rather than gold. Besides, the survey also highlighted that jewellery is more preferred than gold bars or biscuits.
Commenting on the implications of the findings, Head of India Research at Morgan Stanley, Ridham Desai said, "A fall in the demand for gold will have a positive impact on liquidity and deposit growth, and thus for banking sector earnings."
