Indian buyers ignore gold price rise

Indian consumers seem to be undeterred by the rising gold prices, if the consumer demand data released by the World Gold Council (WGC) for the July - September 2004 quarter is to be believed.

However, WGC has said that jewellery demand in the October - December quarter in India would inevitably be affected by the rise in the prices in November.

Overall, year on year growth rate may not be too greatly reduced since price volatility deterred purchasing towards the end of 2003 as well, WGC added.

According to WGC data, the net consumer demand was higher by 16 per cent in tonnage terms and 28 per cent higher in rupee terms than during the same period in 2003.

For the nine month period from January - September 2004, gold consumption in India increased 9.5 per cent in tonnage terms and 20 per cent in rupee terms.

Commenting on the recent figures, managing director, Indian sub-continent, WGC, Sanjeev Agarwal, said, "The upward trend in the price during the quarter does not seem to have deterred jewellery purchasers in India. Indeed, the reports from the main consuming markets indicate that buyers are not only accustomed to prices in excess of $400 per ounce, but also that they are prepared for possible further price rises."

However, according to traders and dealers, the retail buying declined in November during the main festival season and was reported to be roughly 10 per cent lower than the previous year.

The rainfall in the 2004 monsoon was below normal and this will have reduced rural incomes but the impact is expected to affect primarily the first half of 2005.

In addition the growth of manufacturing and services are starting to reduce the relative size of the agricultural sector although it is still of crucial importance to India.

The global figures compiled for WGC by Gold Fields Mineral Services (GFMS) reveal that consumer demand (jewellery and net retail investment) for gold in July - September 2004 was 6 per cent higher than July - September 2003 in tonnage terms.

The impact of high oil prices and extended promotion supported jewellery off-take throughout West Asia.

The K-gold promotion, a China-focused WGC marketing initiative, pushed up Chinese demand for jewellery after several years of stagnation.

Jewellery demand in Turkey outstripped last year's record.

There was a 74 per cent year-on-year rise in net retail investment in Japan as well, with increased buying of the Senryobako treasure boxes, a wooden box filled with 10 kilo bars or gold coins, which have become a major investment success.

In the year to September, consumer demand globally was 8 per cent higher than a year earlier in tonnage terms and 23 per cent higher in dollar terms.

On the supply front, the overall supply of gold to the market in July - September 2004 was sharply reduced at 828 tonne, 22 per cent below the levels in the corresponding period last year. Identified net central bank selling was 42 per cent below last year with sales partly offset by continued buying from Argentina.