AFP: Surge in demand for gold among Indian investors
NEW DELHI : The demand for gold in India reached an all-time high in the third quarter of 2008. With uncertainty in the financial markets, people in India have started relying on gold as a safe investment option.
According to the World Gold Council of India, US$6.1 billion worth of gold was sold in the third quarter of 2008 in India - a jump of 66 per cent compared to last year.
In fact, the global demand for gold leapt by 18 per cent in the third quarter, boosted by sales in India.
The surge in demand for gold is mainly linked to the global financial crisis, with people looking for 'real assets' rather than paper ones. Investors also see it as an effective hedge against the weak US dollar.
Keyur Shah, associate director, World Gold Council, said: "I would say anytime is a good time to buy gold for long-term reasons. You can keep it for 3-5 years and you will definitely see a benefit.
"And especially in times like now, when there is the economic global meltdown, turbulence in the stock market, the value of gold as an asset class gets highlighted even much more."
India has long been the world's leading gold consumer. The rise in demand is also linked to the Indian culture - demand peaks in the wedding season from October to January.
Mr Shah said: "Gold is an intrinsic part of our culture. That is the reason people buy so much gold in India. India has the largest gold consumers in the world, followed by the Far East, US and Middle East."
India launched its first gold Exchange Traded Fund (ETF) last year, for easier trading of the yellow metal. Gold ETF trade was worth US$25 million when it started last year. Now it has grown to US$150 million.
Investments in gold mutual funds had returns of more than 47 per cent in 2007 in India - higher than equity, debt or other investment options.
Banks too now encourage customers to invest in gold for a good return. And thanks to Indian investors' growing financial literacy about their portfolios, more and more people are diversifying their investment to minimise risk. - CNA/ms
