Prosperity fuels gold investment in India

“The investment demand is more a function of disposable income as the overall savings of the country increases,” Sunil Kashyap,head/managing director at Scotia Capital told Reuters in an interview on the sidelines of a gold conference in Varca in the western Indian state of Goa.

The Indian economy is seeing a growth of about 8 percent and last year recorded a per capita income rise of more than 10 percent,according to government data. On an average,Indians save over 30 percent of their income.

The demand for 100 gram gold bars is quiet strong among investors seeking to lock away a part of their wealth,said Kashyap,when asked which product were investors most drawn to.

In the April to June quarter,India’s investment demand for gold was at 41.5 tonnes,up 7 percent on year,while jewellery demand stood at 123 tonnes,down 2 percent on year,data from the World Gold Council shows.

“You buy jewellery now,may be over 10 years that fashion would have changed. It is better to buy coins,bars and then convert it into jewellery,” he said explaining the rationale investors were seeing while buying coins and bars.

“Earlier people used to buy chains.”

Jewellery and investment demand will,however,be driven by different factors,he added.

“There will be fluctuations between the share of jewellery demand and investment. While jewellery demand will be festival related,investment demand will be price sensitive,” he said.

Kashyap said the festival season demand for gold looked promising this year as an adequate monsoon is set to boost farm incomes. India’s appetite for gold saw the sharpest fall in over a decade in 2009 because of a severe drought.

“We are entering into a peak period of September and October and onwards,so India might do (imports of) 600 tonnes this year,” he said. Last year,India imported 480 tonnes of gold.

India’s gold demand surges during key Hindu festivals such as Dussera in October and Deepawali and Dhanteras in November. Dhanteras is India’s single biggest gold buying day when people buy the metal to invoke prosperity.

Scotia is the only foreign firm among a group of 23 banks and agencies licensed to import gold into India.

While Kashyap did not give details on Scotia’s share in the Indian gold market,industry members say it has a domineering presence and caters to major Indian traders and jewellers.