Gold Jewellery Demand in India Expected to Grow 10% to 15% in 2012

VICENZA, Italy (Reuters)  - Gold jewellery demand in India, a major global market, is estimated to have risen 5 to 7 percent in 2011 and is set to grow a further 10 to 15 percent this year with bullion prices falling back after recent gains, the head of Gitanjali Gems, India’s biggest jewellery retailer said on Sunday.

India’s jewellery demand dropped 26 percent in the third quarter of 2011 to 125.3 tonnes, hit by strong price swings and a weaker rupee, the industry-funded World Gold Council has said.

High Gold Prices and Sinking Rupee Cause Indians to Rethink Buying

MUMBAI (Reuters) - Simone Bora is contemplating the unthinkable — an Indian wedding without lavish amounts of gold after record high prices and a sinking rupee have dimmed her hopes of sparkling at the party.

“We need to think whether to buy gold or not because nearly 30,000 rupees (370 pounds) for 10 grams is too much,” Bora said in a jeweller’s shop in Zaveri Bazaar in Mumbai, one of the world’s biggest gold markets.

Indians are usually the biggest buyers of gold in the world and from October to December, the calendar is full of festivals and weddings, creating many opportunities for people to flaunt their finery.

Frank Holmes: Gold Demand in the East Has Plenty of Growth Potential

SAN ANTONIO (US Global Investors) - A few weeks ago we held our Case for Investing in Gold webcast with the World Gold Council’s (WGC) Jason Toussaint, who gave some remarkable insight into gold demand in the East. In these countries, gold is not only celebrated, acquired, worn or displayed during holidays or special occasions; it is seen as an everyday symbol of wealth.

Increases in demand from China and India have driven a 7.5 percent increase in demand for gold jewelry during the first half of the year despite a 25 percent increase in the price, according to a report released this week from GFMS. However, much of India’s potential gold demand remains untapped.

Toussaint highlighted an interesting fact: Of the roughly 800 tons of gold imported to India each year, only the top 40 percent of Indian households purchase all of the country’s gold, says Toussaint. The other 60 percent of Indians, who may have the same adoration for gold and celebrate Ramadan and Diwali, historically may not have had access to purchase gold. This large population represents a huge untapped market. To fulfill demand, the WGC has created a program with Indian post offices to distribute coins and small pieces of gold. Toussaint says right now there are 700 post offices in the rural areas servicing 90,000 customers and he expects that number to grow. This market is worth pursuing based on McKinsey’s research that a “huge wealth creation wave” is developing in India. As Toussaint puts it, “if purchase patterns continue, we will see from 2005 to 2025, a four times larger gold market in India.”

$22 Billion in Gold, Jewels Found at India Temple

NEW DELHI (AP) — A vast treasure trove of billions of dollars in gold coins, jewels and precious stones unearthed at a Hindu temple in India was expected to grow further in value Monday as officials opened the last two secret vaults sealed for nearly 150 years.

The discovery has instantly turned the 16th-century Sree Padmanabhaswamy Temple into one of the wealthiest religious institutions in the country, prompting a government move to beef up security around it.

The four vaults already opened in recent days at the temple in Trivandrum, the capital of the southern state of Kerala, held a vast bounty that unofficial estimates peg at $22 billion.

Other treasures unearthed so far include statues of gods and goddesses made of solid gold and studded with diamonds, rubies, emeralds and other precious stones, crowns and necklaces, all given as gifts to the temple over the centuries.

Farmers in India Get Cheap Loans Against Gold

MUMBAI  - Farmers in India have a new trick up their sleeve, especially those in the southern states of India. Many farmers have found to their amazement that banks are ready to extend loans to the farmer if they tender gold jewellery as collateral. Though the custom is an old and tried one and harboured for several years by local money lenders and non banking financial institutions in smaller villages, what has now got farmers flocking to the nearby bank is the low rate of interest.

“Most farmers have woken up to the fact that they can get a loan, using gold as security, for a low interest rate of just 4%. Farmers currently pay 7% on crop loan. There is an interest subvention clause that most farmers are drawing on these days, ostensibly under the category of farm loan.,” said Chaitanya Shellar of Sonamull Traders, a bullion investment firm.

Several years ago, India’s central bank the Reserve Bank of India asked its member banks to introduce short-term farm loans at an interest outgo of 7%. The idea was to encourage farmers to build on the agricultural acerage.

Indian Investors Bail Out of Silver

MUMBAI - Silver appears to have lost its shine for most investors in India, with many preferring to transfer funds from the white metal to the dollar and even the equities market. Traders and analysts say that most investors are a bit skittish because of the metal’s wild price swings and are wary of global concerns that could dull its shine.

“As of last August, silver jumped over 175% to around $50 at the start of May. And then, it slumped almost 35%, to hit a low of $32.33 on May 12. Though it has risen to $38.18 over the weekend, the massive ups and downs are scaring people off,” said Santosh Mahendale, equities and precious metals analyst at a foreign brokerage firm in Mumbai.
Moreover, he added the dollar index has fallen on poor housing data emanating from the United States, which was another indicator that interest rates would not be hiked in the near future.

Analysts maintain that an interest rate hike in the US before mid-2012 would likely weigh on prices, in addition to the euro-zone debt fears.

Anshuman Daga, precious metal investor said silver has fallen by 28% over the past month, from a record high of $1,680.60 per kilogram on April 25, to $1,202 per kilogram on profit booking and a stronger dollar. “Apart from profit booking by fund houses, there have been successive margin hikes by the Chicago Mercantile Exchange. The exchange has raised margins to $21,600 per future contract from $16,200 per contract. They have also increased the maintenance charges by $2,000 from $12,000. All of this has impacted prices and has made investors wary,” said Daga.

Indian Buyers Help Lift Gold Sales in the Middle East

MUMBAI - The Middle Eastern market, which has seen sustained interest in large denomination bullion bars from high-net-worth individuals, has a new ally. Heavy buying from expatriates from the Asian subcontinent, notably India, has spurred sales of the precious metal.

An important consumer segment in the Middle Eastern gold market, especially Dubai, are expatriate Indian people who live in the United Arab Emirates as well as others from India who are touring the region.

Gold souks and bourses in the Middle East are now targeting non-resident Indians (NRIs) and Indian expats by offering them loans and discount schemes to feed their gold bar frenzy.

Traders believe that Indian consumers have helped pull up sales in gold bars and coins in the Middle East, which has seen 10% growth in bars and coins in the first quarter of 2011, as against a 16% slump in gold jewellery sales during the same period.

Indian Investors Turn to Gold ETFs

MUMBAI - Gold exchange traded funds, also called gold ETFs, are the flavour of the season in India. Investors are rushing to trade in gold ETFs, which allow investment in the yellow metal in non-physical electronic mode.

As the Indian stock market tanks on a regular basis these days, small and wary investors are eager to invest their money in a safe haven. Preliminary figures for gold ETF activity released by India’s central bank indicate a continued positive trend, with several new gold mutual funds being  launched in the first quarter of the year.

According to the Securities and Exchange Board of India, which is India’s capital markets regulator, assets under gold ETFs increased 170% during 2010-11 to $ 976 million (Rs 4,400 crore).

Gold ETFs have been regulated by SEBI since their inception in 2007. SEBI has held that the valuation for gold held by a gold exchange traded fund scheme shall be at the AM fixing price of London Bullion Markets Association (LBMA) in US dollars per troy ounce, for gold having a fineness of 995 parts per thousand.

Silver Set to Shine Again in India

MUMBAI - The relentless slide in silver prices has been termed a temporary aberration by silver producers in India, who insist that since silver has had its biggest run in the shortest period of time, there is bound to be profit taking by certain investors.

“Give it some time. The market will correct,” said an unfazed senior official at Hindustan Zinc. The company is targetting a 43% increase in production in the next financial year, 2012-13.

Vedanta Group, through its subsidiary Hindustan Zinc, in enroute to also becoming one of the largest integrated silver producers globally. The aim is to ramp up production from its Sindesar Khurd mine, in Rajasthan.

Also set to follow is is Hindalco, which is likely to produce 60-70 tonnes of silver by 2012-13. Hindustan Copper is also ramping up silver production.

Price Drop Makes Silver More Attractive in India

MUMBAI - Gold, which is the hot favourite amongst investors in India for purchase during the gold-buying festival on May 6th, was forced to give way to silver, given its massive slump in price.

Silver coins tumbled by $ 313.34 to $ 1,410.15 for buying and $ 1,432.43  for selling of 100 pieces. The precious metal, which has been up 150% since August, has turned out to be one hot commodity.

“This year, traders and jewellery houses have bought a large number of coins in 100-lots, since many corporates have decided to present a silver coin to their employees along with their annual increment and bonuses,” said an official of Sonawala Traders’, which is a bullion house dealing in commemorative pieces.