World Gold Council’s Indian chapter Friday reported that the country consumed 66 percent more of the precious metal in 2010 as compared to the previous year — a total of 963.1 tonnes valued at Rs.1,733.3 billion (about $38.4 billion).
WGC said the growth was primarily driven by increase in gold jewellery consumption and investment in gold bars and coins in the country, which has seen an exorbitant increase in gold prices last year.
“The year 2010 saw one of the highest growths in gold consumption in the country till date,” said Ajay Mitra, WSG’s managing director for Middle East and India.
According to him, the precious metal seems to be on a bull run even in 2011, even while the prices may increase due to massive buying by central banks of many Asian countries and the uncertainty in the international currency market.
“If we look at the strong growth in January in which the country consumed around 85 tonnes of gold — which was higher than the previous year’s like period, we foresee a sustainable demand this year,” he said.
Regarding prices, Mitra said the high demand in 2011 may drive up even further the price of the high value metal which stands at Rs.20,700 per 10 grams.
“If we look at some indicators like a 22 percent increase in prices in the last three years, then gold prices this year may go up, but then this is not certain,” Mitra said.
While the demand last year was led by gold jewellery consumption, which grew by 69 percent at 745.7 tonnes valued at Rs.1,342.1 billion, that of investments in gold products like bars and coins grew by 60 percent at 217.4 tonnes priced at Rs.391.3 billion.
The astronomical rise in the consumption of gold, according to Mitra, is due to many factors including stocking up of gold and diversification of assets by several central banks of Asian countries, coupled by geo-political conditions and heavy buying of gold jewellery in Indian and China.
Mitra further said that the Indian government may increase the import duty on the yellow metal in the coming budget session, since high prices did not upset the consumption pattern of the Indian consumers.
“Last year, the country imported 918 tonnes of gold the highest in a year. The government, it seems, may go ahead with a marginal increase in the duty,” Mitra said.