Gold exchange-traded funds (ETFs) mushroom in India

India is the world’s top consumer of gold,accounting for 20 percent of global demand. In a country where many of the 1.2 billion population live far from a bank,Indians traditionally invest in gold jewellery.

Here are some key facts and figures on India’s gold ETFs:

– India has eight gold ETFs currently listed with a total collection of more than 15 tonnes,up 57 percent on a year ago.

– India’s gold ETF collection is small compared to its approximately 700 tonnes of annual gold consumption. But industry players suggest it could rise by at least 50 percent year-on-year.

– Mumbai-based Benchmark Mutual Fund,owned by Goldman Sachs Asset Management,was the first to start a gold ETF in 2007 and has the largest collection of more than eight tonnes.

– The ETFs are listed on India’s National Stock Exchange and Bombay Stock Exchange and most of them have a minimum individual share size of one gram.

– HDFC Mutual Fund is the latest to offer a gold ETF,which started trading last week. ICICI Prudential,which has already collected funds,will list its ETF soon.

– Gold funds have been witnessing explosive growth due to the convenience of buying paper gold,which can be acquired online,and the guarantee of quality,that is absent in jewellery,officials managing the ETFs say.

CALENDAR: Auspicious days for gold purchases in India in 2011

The following are some of the days considered auspicious,according to the Hindu calendar,for gold purchases in India:

Date Festival name Reason

Sept.22 Gurupushyamrit Launching new ventures

Oct. 6 Dussera Harvest-related

Oct. 20 Gurupushyamrit Launching new ventures

Oct. 24 Dhanteras Celebrating wealth

Oct. 26 Deepavali Victory of good over evil

Oct. 27 Balipratipada Final day of Deepavali

Nov. 17 Gurupushyamrit Launching new ventures

The biggest gold buying festivals are Akshaya Tritiya,which falls in the second quarter of the year,and Dhanteras.

An inauspicious phase — Shradh,a period for paying homage to ancestors — is from Sept. 13 to Sept. 27.

The Hindu calendar has regional variations,but the above dates are broadly followed across the country in the gold trade for planning inventories.

Key facts about India’s gold industry

India’s centuries-old gold industry is the world’s biggest market for the metal,with imports meeting almost all the country’s 800-900 tonnes per year requirements for jewellery and investment.

The market was only freed up in 1997,when the government allowed banks and other state-run trading firms to import the sensitive commodity directly.

Here are facts on the industry and changes taking place:

– India’s gold imports rose 34.9 percent to 553 tonnes in the first half of 2011,according to the World Gold Council (WGC). Imports jumped 72 percent in 2010 to 959 tonnes.

– Imports are high but with a population of 1.2 billion,per capita consumption is relatively low. Per capita gold consumption is only 0.7 grams,half that of the United States and one-third of the Middle East,according to World Gold Council estimates.

– India’s gold market is estimated to have more than 300,000 jewellers,mostly small,family-run businesses,a WGC study showed. Many jewellers are one-room shops with long-standing ties with customers,and items are often sold by weight.

– Only 31 state-run and private banks along with government trading agencies have licences to import gold because of its implications for foreign exchange flows.

– India’s 2010/11 budget raised the import duty on gold and platinum to 300 rupees ($6.65) per 10 grams from 200 rupees previously,with the duty on silver raised to 1,500 rupees per kg from 1,000 rupees earlier.

– Investment purchases of gold have been rising faster than jewellery purchases. The WGC’s latest data shows the investment to jewellery ratio was about 17:83 in the first half of 2011.

– Gold buying in the form of exchange-traded funds is rising. Launched in 2007,the total collection among seven fund houses is over 15 tonnes,nearly double the level a year ago. – Large jewellery companies,such as Titan Industries ,Reliance Jewels,Rajesh Exports and the state-run MMTC Ltd ,are targeting the retail market with plans for hundreds of branded shops. They are hoping to attract sales from customers looking for a well-known name as a guarantee of quality.

– In 2009,India’s gold market had its weakest year since trade was freed up in 1997. Record high prices and a failed monsoon meant imports fell 33 percent from the previous year to 480 tonnes,against an annual range between 600 and 800 tonnes in the previous five years.

– Following table shows India’s imports of gold in the last seven years in metric tonnes,according to WGC data:

Gold imports

2011 *553

2010 959

2009 559

2008 660.2

2007 769.2

2006 715.5

2005 721.6

2004 614.5

* From Jan-June