At a time when the Indian exporting community is feeling the heat of rupee appreciation, gems and jewellery export that recorded a poor growth of 2.7 per cent in 2006-07 is witnessing a turnaround, said a Reserve Bank of India [Get Quote] (RBI) analysis on the country's foreign trade.

According to the RBI, the rise in exports growth is fuelled by a strong demand from all all international quarters, especially Hong Kong and US.

It further said the supply-demand imbalance is primarily responsible for sudden spurt in gold prices all over. The rupee appreciation of more than 10 per cent this fiscal, according to analysts, has also increased the competitiveness of gems and jewellery sector by making imports of raw materials like gold and uncut gems cheaper.

The World Gold Council (WGC) has pointed out that total gold supply for the second quarter of this year stood at 840 tonnes whereas the demand stood at 944 tonnes.

"Global demand for gold jewellery showed the strongest surge, reaching 14.5 billion dollars in Q2 2007, a 37 per cent increase over Q2 2006...," added WGC.

International gold prices began to pick up from 2001 and this year witnessed a sharp rise in gold prices. Gold prices crossed the $700 per ounce mark on October 19, 2007. The domestic prices also followed the international trend.