In tonnage terms, demand for gold increased to 250 tonne in the third quarter of 2008 from 190 tonne in the same period of 2007, which is a 31% increase, according to Gold Demand Trends, released by the World Gold Council (WGC). Demand for gold jewellery reached 178 tonne during the quarter, registering a rise of 29% in tonnage over the same period in 2007, despite the deteriorating economic situation that is putting a greater squeeze on consumer spending. In terms of currency, this is equated to a rise of 78%, from Rs 12,300 crore to Rs 21,900 crore.
After a sluggish start to the quarter, the surge in the demand for gold jewellery was driven by the rural economic boom and urban consumers wanting to safeguard their investments. Much of India experienced good rainfall during the monsoon, which resulted in a 'feel good' factor that boosted rural spending on gold during the festive season.
Ajay Mitra, MD, WGC, commented: "It has been an outstanding quarter for demand in India, the world's largest consumer of gold."
The data, compiled independently for WGC by GFMS Limited, showed that investment demand for gold received a similar boost by the pullback in gold prices during the third quarter. Purchases of gold bars and coins by retail investors amounted to 71 tonne, the second highest seen in a quarter on record and equivalent to a rise of 36% over the 52.3 tonne consumed in the third quarter of 2007.
"Looking forward, we believe that the uncertainties in the financial markets will continue, therefore driving investors towards gold for its safe haven and insurance policy characteristics," he said.