Demand for gold in India soared almost sevenfold in the first quarter of the year as investors rushed to the metal as a haven from growing economic and market troubles around the world, the World Gold Council (WGC) said. Consumers in India and China, who have long been heavy investors in the metal, have grown accustomed to soaring prices, the organisation said, leading them to invest even as gold hit new highs.
In the first three months of the year, demand for gold in India soared 698 per cent to 193.5 tonnes compared with the same period last year, while Chinese demand rose 11 per cent to 105.2 tonnes. "They are getting used to the price, definitely," said Chandu Siroya, the vice chairman of the Dubai Gold and Jewellery Group. "As far as the demand is concerned, if [gold] remains at this price - above $1,000, $1,100 - it should be robust."
German and Swiss investors were also boosting demand for gold as they sought protection from the crisis engulfing the euro, the WGC said. The strong demand in China and India came even as the gold industry group reported that global demand fell by 25 per cent to 760.2 tonnes in the first quarter this year, from the same period last year. The volatile economic environment globally has caused the price of gold to fluctuate, which might have dampened demand a bit, Mr Siroya said.
"That is what causes them to draw away. It goes up all of a sudden and it goes down all of a sudden. They are not sure where it is headed, so they all wait and watch. When it stabilises, they will buy gold." The council said it expected concerns over Greece's public finances and overall fears of a debt contagion in Europe had fuelled the purchases of gold coins and bars and had driven interest in gold exchange-traded funds this month. As of last Thursday, it said, SPDR Gold Shares held a record 1,200 tonnes, with a value of US$46.88 billion (Dh172.19bn).
"With the global economic recovery still burdened by high and rising debt levels in western economies, as well as the renewed threat of recession driving down the US dollar and equities, the outlook for gold as a liquid, reliable asset class and as a store of wealth remains highly favourable," said Aram Shishmanian, the chief executive of the WGC. Spot gold hit about $1,214 yesterday afternoon. Net retail investment demand, which covers bars and coins, was up 26 per cent in the first quarter of the year.