Gold sales up 21% in India

Gold was in big demand during the first three months of this year, despite a sharp increase in its price triggered by the sliding dollar. 
 
India's demand continued unabated and rose 21 per cent during January-March 2004, boosted by a strong economy and rural customers benefiting from the after-effects of 2003's good monsoon rains. 
 
The gold price during the quarter averaged $408 an ounce compared with $352 in the same quarter last year. 
 
In contrast, demand from institutional investors was subdued. Having snapped up gold in January amid expectations of further price rises, profit-taking set in and new investment dried up. 
 
The overall consumer demand for gold including jewellery and net retail investment was up 25 per cent in tonnage terms and 37 per cent in rupee terms during the same period compared to the corresponding period in 2002. 
 
Sanjeev Agarwal, managing director of WGC in the sub-continent, said, "In India too, we have witnessed a surge in consumer and investor confidence in gold which is reflected in 47 per cent increase in investment in the form of bars and coins. In spite of the increase in gold prices, the Indian consumers continue to be attracted towards buying." 
 
Demand for gold bars and coins has increased because of its values of providing stability and security to the overall investments and has

ensured that the shine is back in the Indian gold market, he added. 
 
Though the trends are positively inclined for the future, other political and economic factors would be crucial for the industry. 
 
Agarwal said, "We expect the new government to take some positive steps to channelise part of the Rs 5,000 crore (Rs 50 billion) of annual savings being invested in physical bars and coins to be routed through the banking sector in the form of a more efficient savings vehicle." 
 
Gold struck a peak of $425.50 in January, shortly before the dollar went into a tailspin. The report notes speculative selloff of gold investments appears to have continued in the second quarter of the year and may even have intensified. 
 
However, Jill Leyland, senior economist at the World Gold Council, said that worsening financial market jitters and geopolitical tensions could tempt more speculative buyers into the market in the coming months. 
 
Commenting on the supply-demand dynamics, the chief executive of the WGC, James Burton said, "In the face of a 55 per cent rise in the dollar gold price, historically we would have expected the consumer demand to recede due to the sensitivity of Asian and Middle Eastern markets to price volatility." 
 
He reiterated that the rise in the money flowing into gold from consumers was only demonstrating a positive underlying trend.