Demand for yellow metal up by 17% in first quarter

"Buying activity between January and February for festival and wedding season was strong as the domestic premium over prices in international market fell due to weak world trend," it said. The substantial increase in the official imports during the first quarter of 1998 was contributed to various factors like permitting commercial banks to import gold under open general license (OGL) and a record of 125.7 tonnes of gold was imported under the scheme in thefirst quarter.

The Reserve Bank of India (RBI) had recently announced that banks would be allowed to import gold on loan, suppliers’ credit, unfixed price basis and consignment, effectively allowing Indian banks to provide gold loans to the domestic market. A gold bullion coin was launched through 23 branches of a non-bank financial cooperative, the Maharasthra Apex Bank. This was the first time that an NBFC sold physical gold products at a consumer retail level, it added.

The domestic price premium versus the international price was further narrowed to 5.9% in Mumbai delivery by March this year. "With the recent trends towards deregulation, the Indian Gold industry in moving in a very positive direction. This has reinforced consumers confidence in gold which is reflected in the increase in domestic demand," said Rolf Schneebeli, chief executive-Middle East and India, World Gold Council.

Commenting on the world scenario, Schneebeli said "the increase in demand for investment gold in the West (Europe andUSA) and the selling of gold by SE Asians are two sides of the same coin". "While SE Asians have sold the gold they had bought over the years to tide over financial and economic crises, the West is back to accepting the traditional role of gold as a nest egg by buying more of it for investment reasons.

"The demand in the first quarter of this year is the perfect illustration of the fact that gold is the metal of choice across the world," he said.