The Hindu : Gold spend up 8 p.c.

Online edition of India's National Newspaper
Wednesday, Feb 26, 2003

Business

Business

Gold spend up 8 p.c.

By Our Staff Correspondent

MUMBAI FEB. 25. The value of gold consumed in India in 2002 was up 8 per cent as compared to 2001 according to statistics released by the World Gold Council (WGC).

In tonnage terms, there was a 5 per cent fall from 843 tonnes to 797 tonnes during the period under reference. This has been attributed to the rising and volatile gold prices, with the average gold price ($310.07 per ounce) appreciating by 14 per cent ($ 271.04 in 2001) and price volatility by 22 per cent in 2002.

The 797 tonne Indian gold market in 2002 was serviced by a mix of new gold imports and recycled gold (gold that comes back in the market when consumers exchange/encash existing gold they hold). In 2002, the quantity of gold demand met through recycling was up 95 per cent over 2001 from an estimated 165 tonnes in 2001 to 322 tonnes in 2002. Consequently, fresh official imports of gold fell 31 per cent from 594 tonnes in 2001 to 410 tonnes in 2002. The change in the mix of new imports vis-a-vis recycled gold reflected the price-sensitive Indian consumer's reaction to increasing prices and price volatility. Hiroo Mirchandani, Associate Director, Jewellery (India), WGC, said, "Gold's inherent value as an adornment and secure savings option was clearly evident in 2002.

Despite high and fluctuating gold prices, Indian consumer's loyalty to gold continued particularly during the festive season and marriage season in the latter half of the year. In a year dotted with underperforming stock indices, plummeting interest rates, gold came out the winner as the ultimate hedge against risk — something the professional investor in other parts of the world is rediscovering. The 8 per cent increase in the value of gold consumed reasserts the equity this auspicious yellow metal enjoys in India, the largest gold consuming nation in the world.''

Gold emerged as a viable and secure asset class, due to geo-political concerns in 2002 — erratic performance of key global currencies, risks in the equity and bond markets and the banking sector in Japan and an increasing mistrust of corporate reports in the wake of corporate governance problems. The continuing concerns after 9/11 and the emerging political crisis in Iraq and North Korea have driven gold prices higher, resulting in India's demand being met increasingly by recycled gold than by new imports, according to WGC.

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