Marriages to keep gold shining

The World Gold Council has painted a bullish picture for gold demand in India.

In its report , published today, the council has said that the average 10 million marriages that take place in India every year could help maintain the gold demand in the country shinning.

“India remains the cornerstone of the global gold physical market,” said the council in a special chapter on India in its report. The Indian gold jewellery sector accounted for 75 per cent of the total domestic gold demand in 2009. According to the council’s estimates, 10 million marriages take place every year in India and the demand for such occasions accounts for a substantial proportion of the overall jewellery demand.

“As consumers have adjusted their price expectations upwards, a further rise in the price could be anticipated,” said the report. At present, gold is priced at Rs 18,500 per 10 gram in the Mumbai market, against around Rs 16,500 per 10 gram a couple of months ago.

Most market participants believe that some correction in prices from every level see buying by actual users. However, WGC highlights several factors that can support gold demand in the coming months, apart from buying during the marriage season.

Rising income levels of urban Indians, tax concession in the Union Budget 2010-11, normal monsoon forecasts for this season, overall acceptability of gold as the most liquid asset among rural population and investors’ preference are some of the factors which could keep gold in demand in the days to come.

The report further said: “WGC believes that Indian investors may continue to move into gold as an insurance policy to protect their wealth from the aftermath of the global financial crisis, since there are few assets that have the ability to hold their value during extreme conditions.”

“Given the rebound in gold demand and higher price expectations, WGC expects a positive outlook for the Indian gold market for 2010,” it said in its concluding remarks.