India146;s gold demand slips; China 038; US forge ahead

India8217;s position as the numero uno gold market in the world is under threat with the demand for the yellow metal...

India8217;s position as the numero uno gold market in the world is under threat with the demand for the yellow metal falling by 64 per cent in the fourth quarter October-December of the year 2007. With Indians spending less on gold, China and the US overtook India in demand for the yellow metal during the period.

High and volatile gold prices had a major impact on the fourth quarter, with identifiable global demand falling by 17 in tonnage terms from year-earlier levels. The figures, compiled for the World Gold Council WGC by GFMS Limited, show this trend was most keenly felt in India, the world8217;s largest and also most price sensitive gold market, where demand fell 64 per cent to 83.9 tonnes from 230.1 tonnes a year ago. This fall has come after a 40 per cent growth in the first three quarters.

Gold demand in China surged ahead with demand rising 20 per cent to 84.8 tonnes in the fourth quarter as against 70.5 tonnes in the same period of last year. Though the US was also negatively impacted with a combination of a weak economy, poor retail environment and record prices denting jewellery demand, total gold demand showed only a 15 per cent decline at 110.7 tonnes 8212; which is still more than India. It would appear that an 8220;affordability8221; mark has been reached in certain lower value segments of the market, although time will tell whether this will be overcome.

8220;High and volatile gold prices in recent months have meant we have now entered a period of challenging trading conditions in the gold market, which have heavily impacted consumer demand for gold especially in the jewellery and retail investment sectors,8221; said James Burton, CEO of the World Gold Council. Standard gold price has gone up by 22 per cent to Rs 11,620 per 10 grams in Mumbai in the last one year. With the stock market showing huge volatility, investors have been increasingly putting money in the safe haven of gold globally. And prices in India are dictated by global trends.

The combination of a robust economy and buoyant stock market helped to fuel purchases of the metal during the first 8-9 months of the year, despite the gold price exceeding the psychologically significant level of Rs. 9,000/10g in September. 8220;In the fourth quarter, however, demand decelerated sharply as the gold price underwent a period of considerable volatility and reached record highs of over Rs 10,000/10g. Consumers in India pay more attention to the stability of the gold price than the outright price and may delay purchases until the price has settled down, even if it stabilises at a higher level,8221; WGC said.