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Gold Demand in India

Written By Luke Burgess

Posted February 26, 2009

Gold demand in India increased 84% during the fourth-quarter compared to the same quarter of 2007, led by a spectacular 107% rise in jewelery demand.

Indian retail consumers invested an all-time high amount of US$1.745 billion, compared to US$1.422 billion, a 23% increase.

Of the total value in gold, jewelery constituted 71% while investment comprised 29%, especially products such as gold bars and coins. In 2008, gold outperformed most asset classes and provided a 32% return on investment in rupee terms.

October’s fall in the gold price from levels above $US900/oz (which coincided with a record high in Rupee terms of Rp43,373) to $US712/oz occurred during the Diwali festival, a key gold buying occasion in India.

Consumers, who had been hoarding cash due to extreme financial conditions, took the opportunity to move back into gold, resulting in acute shortages of the metal.

– luke