India retains top slot in gold consumption
An 83 per cent fall in India’s gold demand in January-March last year made China the top consumer during the first quarter. During the second half of last year, there were even talks of China topping India in gold consumption. But that was not to be.
One reason is that during 2008 and 2009, Indian demand for gold witnessed a decline. It declined 7.8 per cent in 2008 compared with 2007 and last year, demand fell 33 per cent compared with 2008 (See table).
The consumer demand trends for individual countries for 2009 show that India is still the top consumer, thanks to a 57 per cent consumption growth (76 per cent growth in jewellery demand alone) in the fourth quarter.
“Technically, China overtook India as the top consumer for a short period. Let me stress that this is not a competition between India and China,” said Mr Aram Shishmanian, the Chief Executive Officer of the World Gold Council. He was affirming that India is the top gold consumer during an interview with Business Line.
“In the next five years, India will emerge as the third largest economy. China will continue to grow and we will see demand in all forms from both countries for gold,” said Mr Shishmanian, who was here along with other Gold Council officials last week. They were in Chennai to hold their quarterly meeting to review the economic developments and chalk out strategies for marketing gold.
The council is refocusing on both the countries. “The real focus will be on India and China, though our focus on other countries will continue,” he said.
Terming Indian investors as “sophisticated”, Mr Shishmanian said the people in the country were most astute in gold purchases and “the world is beginning to learn from India”.
Old versus new
One reason for the fall in Indian demand in the first quarter of 2009 was because people chose to trade their old jewellery for new. Gold consumption in that quarter fell to 17.7 tonnes with jewellery offtake at 34.7 tonnes and investment demand a negative 17 tonnes.
World Gold Council officials, including Mr Shishmanian, Mr Marcus Grubb, Managing Director- Investment Research and Marketing; and Mr Jason Toussaint, Managing Director- Investment, say the sale of old jewellery or recycling of gold was unique.
“It was a short-term decision by the Indian people to sell old jewellery and buy new one,” said Mr Grubb.
“During 2009, 30 per cent of the new gold for sale came from recycling 1,000 tonnes. Quite a lot of it was from India,” said Mr Toussaint.
“It is cost-effective to sell old jewellery and buy a new one. It has also helped in getting the latest design for the consumer,” he said.
In India itself, the World Gold Council is viewing Tamil Nadu and Kerala as key markets.
Southern region
“The per capita consumption of gold by Tamil Nadu and Kerala is the highest in the world. The region, as a centre, is the single largest consumer than any other centre or region in the world,” said Mr Shishmanian.
“In India, 30 per cent of the demand for new consumption is from this region,” said Mr Toussaint.
On the Centre’s move to hike the duty on gold to Rs 300 for 10 gm from Rs 200, Mr Shishmanian said it would affect demand in the short-term.
But the Council is upbeat about India, particularly South India, which it says will be the main consumer for many years to come.