Gold offtake may top 1,000 tn this year

Gold consumption in India is likely to cross 1,000 tonnes for the first time if prices remain stable or grow steadily, according to the World Gold Council (WGC).

In the first half of the year, gold consumption rose 70 per cent over the corresponding period last year. The first six months saw gold consumption of 528 tonnes compared with 307 tonnes in the first half of the last year. In 2006, India's total consumption of gold was a little over 700 tonnes.

WGC Managing Director and Chief Marketing Officer Philip Olden says he is "cautiously optimistic" that this growth rate will not dip. "If there isn't too much volatility in prices, the second half should also see this high rate of growth in consumption. Also, the festival and wedding season, which creates a strong demand, is just starting," Olden said. On Tuesday, Gold prices were around Rs 9,000 for 10 gm.

Of the 528 tonnes consumed this year, it is jewellery rather than investment that has driven sales. While 387 tonnes have been bought as jewellery, the balance has been bought for investment in the form of coins and bars.

According to Olden, several factors are driving the demand for gold in the country such as retail networks expanding rapidly and broadening of demand outside the wedding category.

In India, rural areas are a large consumer of gold. Last year, 60 per cent of the demand for gold came from rural India and the WGC says the trend is likely to continue.

"The reason behind this is the growing affluence of rural India. Besides, they have fewer investment options than the people in towns and cities," World Gold Council Vice-President K Shivram said. This trend is likely to continue as more and more retailers expand their networks to small towns and rural areas.

Globally, the consumption in the first half of the year was 1,480 tonnes, 25 per cent growth over the same period last year.