The precious metals story will be a surprise to those who assume that rising incomes will lead to higher consumption of jewellery and gold, the report said, adding, Although India is the largest gold consumer in the world and by far the largest among the BRICs its consumption has actually fallen, in both volume and percentage terms, since 2001.
Goldman Sachs estimates that Indian gold demand had tapered to around 15% of world consumption in 2005, from about 20% between 2000 and 2001. India imported 724 tonne of gold for jewellery and investment in 2005, up 17% in the year, the World Gold Council said in February.
The volume for 2006 may only be as high as 650 tonnes due to rising prices, said AngloGold Ashanti Ltd, one of the biggest sellers of gold to Indian consumers.
US gold for June delivery (GCM6) closed in New York, on Tuesday at $692.90, up $7.90, after losing $26.80, or 3.8% on Monday. The precious metal hit a 26-year high of $730 on Friday.
Goldman Sachs said, Although rising per capita incomes suggest that Indians should be buying more gold recent financial liberalisation may be undercutting one of the chief rationales for gold ownership. If this pattern of regulatory opening continues, then we may not see the steep increases in Indian gold consumption that many expect.