India's gold consumption jumps 66%

General economic theory says when the price of a good or service goes up its demand comes down. But the passion of Indians to acquire gold at any cost, and quite literally so, has defied this logic in 2010.

Indians bought total amount of 963 tonnes of gold worth US$38 billion (Rs 174,727 crore) in the calendar year 2010 against 578.50 tonnes in 2009. Thus, Indians bought 66 per cent more gold in 2010 in year when the average price of gold in India was 23 per cent higher. In value terms our consumption growth was even higher at 105 per cent: $38 billion in 2010 against $18 billion in 2009 we bought. This was revealed in a recent report by World Gold Council (WGC).
In fact, among 25 countries for which WGC has compiled data, India was the largest consumer with fastest growth. Our share in the global jewellery market also jumped from 25 per cent to 36 per cent, according to WGC. The second fastest growing country in gold consumption was China whose total consumption in 2010 was 607 tonnes, 29 per cent more than 2019.  Commenting on India’s demand for gold, the report said “India was the main engine of growth in the jewellery sector throughout 2010 and the fourth quarter (December quarter) was no exception. This key market witnessed a remarkable surge in demand to 211 tonnes in Q4, a rise of 47 per cent from Q4 2009.” Jewellery demand was boosted as a result of the festive season, in particular Diwali festival in early November, it said. Another reason behind Indians rushing for gold is that we always consider the precious metal as best hedge against inflation which was running high throughout the year. Besides, we also believe, a bit erroneously, the price of gold only goes up.
“Indian consumers appeared almost universally to expect that the local gold price was likely to continue rising, and this belief fuelled demand, further highlighting the strength of the investment component of gold jewellery demand in India,” WGC said. The rising price of gold, particularly in the latter half of the year, created a ‘virtuous circle’ of higher price expectations among Indian consumers, which fuelled purchases, thereby further driving up the demand.
The popularity of gold as an investment option is also reflected from the fact that Indians bought 217 tonnes of gold in the form of coins and bars in 2010, 60 per cent more than 2009. The only country which came close to India in buying bars and coin is China with a figure of 180 tonnes followed by Germany’s128 tonnes. To meet its insatiable demand for gold, India imported 918 tonnes of gold in 2010.

(Source: http://www.deccanherald.com/content/139808/indias-gold-consumption-jumps-66.html)