India Sees Strong Jewelry Demand in Q3 2008

Demand for gold in India surged in the third quarter of 2008 ending September 30, reaching an all time quarterly record of Rs. 306 billion ($6.23 billion), a 66 percent increase over the third quarter of 2007 and a 31 percent increase in weight to 250 tons, according to figures released by World Gold Council (WGC) Wednesday.

The rise was driven by investors seeking a safe haven in a troubled economic scenario and by jewelry buyers who returned to the market as prices of the yellow metal softened in the later part of the three month period.

During this period, gold jewelry demand rose 78 percent to Rs 219 billion ($4.45 billion) and 29 percent in volume to 178 tons.

WGC notes that gold jewelry demand which was sluggish at the start of the period, “surged driven by rural economic boom, urban consumers wanting to safeguard their investments… (as) much of India experienced a good monsoon rainfall, which resulted in a ‘feel good’ factor boosting rural spending on gold during the festive season.”

Concurrently, investment demand was boosted by the recoiling gold price during the third quarter and purchases of gold bars and coins by retail investors, totaling Rs. 87 billion ($1.757 billion) for 71 tons. This was the second highest quarter on record.

In certain areas, supply of small bars for retail customers reportedly sold out in the face of the unprecedented demand.

Since the current financial crisis erupted in late September, the volatile prices of gold have impacted demand, though actual figures are yet to be published.

According to Ajay Mitra, managing director of WGC, “Looking forward, we believe the uncertainties in the financial markets will continue, therefore driving investors towards gold.”