Gold, Silver Investments Surge in India.

MUMBAI : Despite the zooming prices, demand for gold and investments continues to surge in India, one of the largest global marketplaces for the bullion metals.

Gold and silver imports by India are set to touch record levels in 2010, according to early data compiled by the World Gold Council (WGC) and the Bombay Bullion Association.

According to WGC managing director for India and West Asia Ajay Mitra, India’s gold imports in 2010 will be around 750-800 tonnes, a record in the last one decade.

Mitra says one reason for the soaring demand for gold and silver is that Indians have correctly understood the great investment sense in bullion. He says India will continue to shine as the largest marketplace for gold and silver in 2011.

There has been growing appetite for gold and silver investments in India in the last few years and jewellery shops are opening across the countryside and cities every day.

“People are buying gold and silver despite the fact that the prices of bullion are historic high. People continue to believe that gold and silver bullion value will continue to soar in the coming years along with other commodities,” Manu Joseph, a jewellery shop owner in Kerala, one of the most active gold marketplace in India said.

According to WGC, demand for gold bullion as an investment in India surged 73% last year.

“Gold and silver purchases this year will continue to remain strong in India and price is no longer a factor,” he said.

India is the largest consumer and importer of silver in the world. According to commodities brokerage Karvy Comtrade silver imports by India soared more than six times to $1.7 billion in the first-half of 2010.

India is the largest importer of the silver in the world and the country consumes more than 4000 tons of silver annually with the bulk of sale being made in rural areas. India has emerged as the third largest industrial user of silver in the world after US and Japan.

The vast majority of silver in India is used in production of ornamental items like jewelry, utensils and gift articles. Industrial use account for about 1300-1500 tons. In rural areas, silver is considered as hedge against inflation and thus provides an investment avenue.

Indians are known to spend substantial part of their income on purchase of silver, partly as an unavoidable expenditure for weddings and other family celebrations and partly as investment.

Demand for ornamental silver is affected by the festive season and marriage season in February, April, June and December as well as the monsoons between June and August.

While the demand has increased substantially, annual consumption is dictated both by monsoon, with its effect on the harvest, and the marriage season. In a significant move, the government has also liberalised the import of Gold and Silver. This will provide freedom to procure inputs by jewellery exporters and add to the cost competitiveness of the Indian jewellery exports.

The Indian demand for silver is very different from the global pattern of silver demand, where 65% of the demand comes for Jewellery, Ornaments and gift articles. Industrial demand forms a minor share. Indian demand plays a major role on the global silver demand.

Industrial demand for silver in India is in the range of 1300-1500 tons per annum, the bulk of which is in pharmaceuticals, plating, electrical, foils, jari, soldering and brazing.

Indian gold demand is forecast to be a record again this year as is Chinese demand. Those who have been wrongly bearish on gold in recent months and years have claimed that Indian demand would fall sharply due to higher prices. This is clearly not happening and Indian demand for gold remains robust and silver demand has surged.

Inflation has risen sharply in recent months and Indian households are keenly aware of how the buying power of their paper rupee is being diluted.

Source : commodityonline.com