Gold demand in India to remain firm, says World Gold Council

PUNE: With consumers driven into buying gold, and a large chunk of savings being invested in the yellow metal, India will continue as the world's largest gold market, the World Gold Council (WGC) said on Wednesday.
In a research paper, "India: Heart of Gold", the global body has addressed the recent developments in the market, in the context of the revival of Indian demand for gold in 2010.
The report is the first in a new series on the Indian gold market, with the second scheduled for publication in 2011, which will analyse the strategic outlook for Indian gold demand over the next several decades, WGC said.
The research paper said, over the past ten years the value of gold demand in India has increased at an average rate of 13 per cent per year, outpacing the country's real gross domestic product (GDP), inflation and population growth by six per cent, eight per cent and 12 per cent respectively. The country currently has one of the highest saving rates in the world, estimated at around 30 per cent of the total income, of which 10 per cent is invested in gold, the paper noted.
"Gold is an integral part of the Indian society and a foundation of wealth and savings in India. As consumers have adjusted their price expectations upwards, a further rise in gold jewellery and investment demand is anticipated and this trend is projected to continue over the long-run as local investors are buying gold driven by wealth accumulation motives," said Eily Ong, Investment Research Manager at the WGC.
"India is the largest gold market in the world and, as such, the likely recovery of local gold demand to pre-crisis levels is of considerable strategic importance to the wider gold market," he added.
According to the research paper, in 2009, total Indian gold demand reached US $19 billion, or Rs 974 billion, which accounts for 15 per cent of the global gold market.
Based on WGC estimates, the nation owns over 18,000 tonnes of above ground' gold stocks, worth approximately US $800 billion at today's gold price and representing at least 11 per cent of global stock, it said.