India's Gold Imports Tipped To Soar To Record Level.

INDIA'S gold imports could reach record levels this year as a booming domestic economy and slumping global stockmarkets drive up demand from investors seeking safe havens.

As the spot price of gold this morning touched a fresh high of $US1911.54 amid continued jitters about the American and eurozone economies, figures from the World Gold Council showed, for the first time, Indian imports of the metal were likely to exceed the 1000-tonne mark in 2011, up from 958 tonnes last year.

India, already the world's biggest consumer of gold, imported 553 tonnes in the first six months of this year, a 34 per cent increase on the same period in 2010.The price of gold has risen by more than a third since March and, according to Praveen Kumar, vice-chairman of the Maya Iron Ores brokerage in Mumbai, the upward trend is likely to intensify in the second part of the year.

"The stockmarket and the real estate market are doing badly in India, so more and more people are being attracted to gold," Mr Kumar said.

Gold prices have risen by 14 per cent this month alone, the fastest rise since 1999 and a contrast to the expected annual growth of the Indian economy of between 7 and 8 per cent this year - itself far outstripping the performances of its rivals in the West.

Surging prices are encouraging Indians to keep doing what they have traditionally done - buy gold to tuck away whenever they have spare cash.

"Every household in India has always bought gold as an asset that is then transferred down from generation to generation," Mr Kumar said. "Right now, incomes are increasing in India and when Indians see world gold prices rising while the value of many other assets is falling, that is an encouragement to keep on buying."

He said many investors were buying gold in the form of exchange-traded funds, which track the gold price. Others were buying physical gold in the form of coins and bars.

With only one operational goldmine, India has to meet its appetite almost entirely with imports, mostly from Australia, South Africa and Russia. Demand for wedding gifts, which makes up about half of India's total gold demand, also remains robust, partly because of India's swelling population.

The number of weddings in India is expected to rise to 12 million this year, up from 10 million in 2001.

India's private stockpile of gold is estimated to be 18,000 tonnes - more than twice the size of the 8100 tonnes held by the US Federal Reserve in Fort Knox, Kentucky. At present prices, that is worth more than $US900 billion.

Source : theaustralian.com.au