Despite higher price, gold demand jumps 41% in Q4

Despite higher price, gold demand jumps 41% in Q4

New Delhi: Gold demand went up 41% to 262 tonnes during the October-December quarter as households flocked to buy their favourite precious metal, ignoring the spurt in prices.
    The rise in demand poses a fresh policy challenge for the government, which is battling to control gold imports as part of its efforts to keep current account deficit under check. Current account deficit is the difference between the trade deficit, net remittances, foreign investment flows and overseas debt
    The finance ministry and RBI have identified gold imports as a key concern and the government has responded by increasing the import duty to 6% from around 1% a year ago. Besides, there is an effort to encourage households to shift from investing in the yellow metal to financial instruments.
    So far those efforts seems to have failed as India emerged as the fastest growing market and retained its position as the largest market, according to data released by the World Gold Council on Thursday.
    In value terms, consumption jumped 54% during October-December 2012 to nearly Rs 78,500 crore, although there was a 21% increase in the average annual price. In the second half of the financial year, demand for gold rose 23% although it fell 12% to 864 tonnes in 2012.
    “The recovery in the fourth quarter was very strong as there was some pent up demand from the first half of the year as also festivals set in a little late,” said WGC managing director Marcus Grubb.
    During the initial part of last year, there was a dip in demand as the government increase the import duty. “In India when gold price increases, it takes some time for consumers to adjust to it. But then buying will continue to be healthy as consumers are mentally attuned that gold will continue to give higher returns,” said Jayant Manglik, president — retail distribution, Religare Securities.
    According to estimates, while the recent import duty hike is likely to dampen demand in the first quarter of 2013, overall demand may rise 12% this year to hit 965 tonnes.