India’s gold demand surged by 84 per cent in the fourth quarter of 2008 on investors’ confidence in the yellow metal as a safe haven.
According to data collated by Gold Fields Mineral Services, an independent consultancy, for the World Gold Council (WGC), India’s gold demand shot up to 147.2 tonnes in the fourth quarter in 2008 from 80 tonnes in the comparable quarter in the previous year. While demand from the jewellery sector rose 107 per cent to 102.1 tonnes, investment demand jumped 47 per cent to 45.1 tonnes, a WGC release said.
The report assumes significance amid analyst estimates that demand for the yellow metal will fall in the country, following record high prices.
Indian retail consumers invested an all-time high amount of Rs 88,056 crore in gold in 2008 as compared to Rs 71,761 crore in 2007, an increase of 22.7 per cent. Of the total value in gold, jewellery constituted 71 per cent while investment comprised 29 per cent, especially products such as gold bars and coins. In 2008, gold outperformed most asset classes and provided a 32 per cent return on investment in rupee terms.
The compounded annualised returns given by gold in the last five years ending 2008 have been recorded at 19.54 per cent (13.63 per cent in 10-year figure).
Gold prices have appreciated by 10.1 per cent, which works out to an annualised return of 81 per cent, in 2009 so far.
Gold exchange-traded fund (ETF) has offered 25 per cent returns while debt accrued 11 per cent. Equity and Sensex have offered negative returns of 49 per cent each.
WGC attributes the rise in demand to some national-level initiatives taken to maintain investor confidence.
For instance, a first-of-its-kind initiative was introduced — retailing of gold coins through post offices in 108 places as a pilot study. It has been now extended to 250 outlets and is expected to expand more in the next 2 years.
The yellow metal was also sold through special initiatives such as the National Lucky Lakshmi Jewellery Shopping Festival , which covered 1,400 jewellers across India.
Sustained investor interest in gold in 2008 against the backdrop of fall in global stocks as well as other asset classes, helped push dollar demand for the safe haven asset to $102 billion, a 29 per cent increase on year. According to the WGC report, identifiable gold demand in tonnes rose 4 per cent to 3,569 tonnes.
