Gold as an investment option is increasing: Amresh Acharya

Q&A with Director-Investment, World Gold Council

There has been a paradigm shift in the gold’s preference as end users are turning into investors. In an interaction with Business Standard, World Gold Council, Director-Investment, Amresh Acharya told Vijay C Roy that gold as an investment option is gaining popularity. In 2006, 27% of gold buying in India was for investment, while in 2011 it touched 37%, further it is expected to be around 40% in the current year. Excerpts:

Analysts say that, now people are preferring gold as investment tool. Is that true?

Gold as an investment option is gaining popularity as compared to ornamentation value. Despite falling demand due to high prices of the precious yellow metal, the percentage of people going in for investing in gold has gone up. In 2006, just 27% of gold buying in India was for investment, while in 2011 it touched 37%. Though physical buying of gold continues to be the most popular form of gold investment, the investments going into gold exchange traded funds is also going up.

Further, last year, the gold demand in India was 986 tonne but in the first three quarters (Jan-Sept) of 2012 it has remained sluggish at 607 tonne. By the end of the year, the demand is expected to reach just 800 tonne. However, from 37% of those buying gold purely for investment (through physical purchase of gold and gold exchange traded funds) in 2011, the percentage of gold investors is likely to be around 40% this year.

 
The first two quarters were not good? How was the demand in third quarter?

The first two quarters the demand was not that great following the economic downturn, monsoon deficit, duty issues and jewellers strike, high prices etc.  

The Indian market witnessed signs of recovery, up 9% to 223.1 tonne in Q3 2012 from 204.8 tonne in Q3 2011, following increases in both jewellery and investment demand.

In comparison with Q3 2011, jewellery demand was up 7% to 136.1 tonne and investment demand rose by 12% to 87.0 tonne. Indians appear to have acclimatised to recent price trends and have been buying into a rising market. However, it picked up during the festival season and this year we expect the gold demand to be around 800 tonne.

How is the demand of recycled gold this year?

The surge in gold prices has led to spurt in demand of recycled gold. Last year, out of the total demand of 986 tonne, 58 tonne was recycled and this year it is expected to touch 120-130 tonne.

What are the main factors behind increase in gold prices in developing economies?

Globally, the gold prices have been up because of a huge demand and supply gap, and the increased use of gold as a hedge against other investment options. The fact that the demand for gold has been high in the emerging markets, and that central banks across the world are becoming net buyers of gold, rather than sellers, has also contributed to the prices going up sharply.