The World Gold Council (WGC) has come out with a study that says gold demand is set to rise. Done in association with Centre for Monitoring Indian Economy (CMIE), the study says that gold demand would rise to 1,200 tonnes by 2020, growing at 3 per cent per annum and 30 per cent over 10 years.
Titled India: Heart of Gold, the report shows how gold demand in India had increased by 25 per cent in the last decade despite the 400 per cent hike in prices over the same period. In 2010 alone, total consumer demand exceeded 960 tonnes. Said Mahesh Vyas, managing director and CEO, CMIE: “Our findings confirm the fundamental strength of the Indian gold market. We expect new demand for gold to be driven by rapid GDP growth, urbanisation, a strong middle class and a rising savings rate.”
When questioned about volatility in the yellow metal at the launch of the report on 31 March in Bengaluru, Marcus Grubb, managing director, WGC, said: “Volatility will continue due to the gap in demand and supply.”
The key findings of the report are:
India holds the largest stock of gold in the world, of which Indian households hold more than 18,000 tonnes.
More than two-thirds of the gold demand is from villages as 70 per cent of India lives in rural areas.
In 2010, India had purchased 32 per cent of the total gold sold in the world.
India’s gold demand is not influenced by its price alone—macroeconomic, monetary and policy factors such as income, interest rate, personal income tax, the exchange rate and government spending, all come into play.
CMIE expects India’s GDP growth at 10 per cent between 2010 and 2015, which is likely to fuel gold demand.
As 50 per cent of Indian population is below 25 and gold is an integral part of weddings in India, the WGC anticipates wedding gold purchases to account for demand of 500 tonnes a year. It also expects an additional 500 tonnes to be gifted during weddings.
