Gold
coins, bars set to outshine jewellery By Siddesh
Mayenkar & Sourav Mishra - Wed Oct 21, 4:28pm IST
MUMBAI
(Reuters) - Gold investors in India, the world's largest consumer,
are likely to outstrip jewellery buyers in 2-3 years with
the economy on the rebound and buyers seeking new ways to
protect their investments from pilferage.
"The signs of heavy increase in investment
demand are visible and may outperform jewellery demand in
2-3 years" said Anjani Sinha, president of Indian Bullion
Market Association (IBMA), which represents about 10,000 jewellers
across the country.
"We may see 20-30 percent rise in investment
demand driven by the new class of investors. Even during this
festive season, demand for coins was more compared to jewellery,
strengthening the trend."
India just finished its peak festive season
that starts in August and ends in October.
IBMA said it has sold 7,000 coins of 8 grams
each since August and hopes to target 100,000 coins within
one year.
India has traditionally been a jewellery-devouring
country, with the important part gold jewellery plays in marriages
and other family celebrations.
But the trend started to change in 2003, when
gold coins and bars were allowed to be sold by licensed banks
and some traders. In 2007, investment demand jumped 11 percent
to 215.4 tonnes.
Even in 2008, when Indian imports fell 7 percent
to 712.6 tonnes at the onset of a global economic slowdown
and high prices, investment stayed steady at 2007 levels.
In 2008, jewellery consumption was 501.6 tonnes,
while investment demand was 211 tonnes. In the first-half
of 2009, when the economic downturn peaked, demand fell 55
percent to 126.7 tonnes, the worst since 1997, World Gold
Council data showed.
Currently, gold jewellery accounts for 70
percent of India's total annual consumption.
SURGE IN THE OFFING
Industry players say the consumption in the
form of investments is likely to surge from here on as the
economic recovery gathers strength.
Former central bank governor C. Rangarajan,
who heads the government panel that advises the prime minister,
said growth in the fiscal year that ends in March 2011 would
accelerate to 7 to 8 percent after growing by about 6.5 percent
in 2009/10.
Gold coins and bars are an attractive investment
option, unlike jewellery, which involves making charges and
wastage.
"Gold coins and bars have more convenient
usage, may be in the form of investment, or deferred consumption
or for gifts," said Nayan Pansare, an independent consultant
to jewellers.
"Definitely, investment demand is likely
to surge as more and more people are looking to gold as an
investment rather than as a fashion statement," said
Rajesh Khosla, managing director, MMTC PAMP Pvt Ltd, a gold
coins refiner.
MMTC PAMP, a joint venture between the state-owned
MMTC and Swiss-based gold refiner, hopes to start its refinery
in the northern Indian state of Haryana in the second-half
of 2010 and expects to produce 100 tonnes of gold coins in
2010.