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Soaring prices may impact India’s gold demand

Soaring prices of gold are expected to impact India’s gold demand, Citi India's Economist, Rohini Malkani, said in a report.

business Updated: Dec 17, 2009 19:44 IST

Soaring prices of gold are expected to impact India’s gold demand, Citi India's Economist, Rohini Malkani, said in a report.

Record-high prices and the global recession, coupled with drought, have kept away consumers this year, impacting India’s gold demand.

Poor demand has also had a knock-on impact on imports, which stood at just 16.5-tonnes in November, down 51.5 per cent y-o-y.

In contrast to the past, consumers now have a 'Rupee budget' rather than a 'weight (grams) budget', Malkani said in a report on 'Spotlight on India’s Gold Demand Trends'.

Historically, Indian gold demand has been price inelastic, with the bulk of Indian demand being jewellery. But record-high prices and the global recession, coupled with the drought, have kept away consumers this year.

Latest data by the World Gold Council (WGC) indicate that India’s gold demand stood at 137.6-tonnes in 3Q 09, down 49 per cent YoY.

Cumulatively, demand in 9M 09 was 264-tonnes, versus 553-tonnes in the same period last year. This could be due to consumers meeting demand by exchanging old items.

According to the World Gold Council, exchange activity accounts for 60 per cent of retail turnover in recent quarters. Consumers also prefer melting down and re-making old pieces and shifting to costume/gold-plated jewellery.