Gold consumption to pick up next quarter: WGC

India will continue to remain the top gold market, according to the World Gold Council (WGC). Though markets like China and West Asia are growing fast in terms of consumption, WGC believes the ongoing volatility in gold prices, during which prices have reached all-time highs in India, the country will remain the biggest market.

Gregory Wilkins, who is expected to take the chairmanship of WGC this week, said, "The prices of gold in India are not behaving any differently. The trend is the same globally. However, the situation is uncertain with higher volatility added with less offtake from the jewellery sector."

Hopeful of surge in demand again, Wilkins said, "We see demand in the first quarter of the current calendar year to be on the lower side. As the year progresses, customers will start coming in the second and third quarters."

Ajay Mitra, managing director (India), WGC, said, "Akshaya Tritya will be one of the biggest events in the first half of the year. We are waiting for the stability in prices. We want to see huge demand during Akshaya Tritya, which roughly accounts for one third of total gold consumption in the country."

However, expressing uncertainty over how things would turn out this year, Mitra said, "If gold prices continue to be volatile, we would need to relook our demand forecasts." During the current quarter, demand has already dipped down by 25 per cent as compared with the first quarter of 2007, he added.

Demand outpacing supply
Gold prices are expected to rule firm on supply constraints. "The world gold production has been falling for the last five years and it will continue to fall in the forseeable future," said Pierre Lassonde, the outgoing chairman of the council. On the domestic prices Mitra said that the level of Rs 10,000 per 10 grams is now history. Gold is increasingly becoming an investment option. "If you look at the past twelve months, compared with any other asset, gold has given the best returns," added Mitra.

No plans for launching ETFs in India
In India, there are five ETFs but none of them are associated with WGC. "We do not intend to launch our trade in India at the moment. Rather, we will be concentrating more on retail investment and jewellery promotion programmes," said James Burton, CEO of the council.

Focus on India
Situations like how quickly India is changing and how the council needs to respond to it will be WGC's focus area. Burton said current gold prices are high but in India, particularly, consumers understand the value proposition. "We hope to get those customers back."