Speculators hedging on India's traditional love for jewelry may be surprised to learn the world's largest gold buyer could take less of the yellow metal despite rising personal incomes there, Goldman Sachs said in a report on Tuesday.
"The precious metals story will be a surprise to those who assume that rising incomes will lead to higher consumption of jewelry and gold," Goldman Sachs said in a report on commodities demand in the BRICs nations - namely Brazil, Russia, India and China.
"Although India is the largest gold consumer in the world -- and by far the largest among the BRICs -- its consumption has actually fallen, in both volume and percentage terms, since 2001," the report said.
Goldman Sachs estimates that Indian gold demand had tapered to just around 15 per cent of world consumption in 2005, from about 20 per cent between 2000 and 2001.
India imported 724 tonnes of gold for jewellery and investment in 2005, up 17 per cent on the year, the World Gold Council said in February.
But the volume for 2006 may only be as high as 650 tonnes due to rising prices, said AngloGold Ashanti Ltd, one of the biggest sellers of gold to Indian consumers.
{{/usCountry}}But the volume for 2006 may only be as high as 650 tonnes due to rising prices, said AngloGold Ashanti Ltd, one of the biggest sellers of gold to Indian consumers.
{{/usCountry}}US gold for June delivery closed in New York on Tuesday at $692.90, up $7.90 after losing $26.80, or 3.8 per cent, on Monday. The precious metal hit a 26-year high of $730 on Friday.
Goldman Sachs said although rising per capita incomes suggest that Indians should be buying more gold, "recent financial liberalization may be undercutting one of the chief rationales for gold ownership".
"If this pattern of regulatory opening continues, then we may not see the steep increases in Indian gold consumption that many expect."
It said India's silver buying had also shrunk to below 10 percent of global consumption last year, from around 18 per cent in 2001.