//In India, bullion now glitters more than jewellery

In India, bullion now glitters more than jewellery

Saturday, May 13, 2006 at 0248 hours IST
MUMBAI, MAY 12:  Soaring precious metal prices have led to a palpable change in the world’s biggest gold-consuming market, with jewellery-loving Indians now buying more bullion in the form of bars and coins.

Though Indians’ famed love for jewellery is under no serious threat – nearly 80% of sales are in the form of jewellery – market watchers say a sizeable segment of the population is now beginning to look at gold purely as a financial asset.

This investment-driven buying also helps gold purchasers save money as they pay record prices, since jewellery adds another 25-30% to the cost to cover design and manufacturing.

“The current investment-led buying is unprecedented,” said Madhusudan Daga, consultant at Gold Field Mineral Services Ltd. “Jewellery shops are now openly displaying the one kilo bar in their showcases.” Mr Daga said bullion, once favoured by wholesalers, is getting popular with two different types of consumers: one set buys to convert it into jewellery for family weddings, while another group, newly rich professionals and investors profiting from India’s expanding economy, buys it purely for the capital appreciation, he said.

Getting Smarter

• People are buying more bullion in bars and coins
• Sales of gold as jewellery still high at 80%
• Investment-led buying up 34% to 135 tonnes in 2005
Official figures spell out the trend. World Gold Council (WGC) data shows that investment demand in India, though still smaller than jewellery, grew much faster in 2005. Investment-led buying accounted for consumption of 135 tonnes of gold last year, up 34% over 2004, while jewellery demand was at 589 tonnes, up 14% on the previous year. “This year, investment buying would be higher,” said Sanjeev Agarwal, WGC managing director for the Indian subcontinent. He pointed to strong sales of gold coins in the Akshaya Trithiai festival on April 30, a big religious day for gold purchases, especially in southern India.

Jewellers in Mumbai said they have seen good sales of coins and bars of all weights – from one gram to one kilogram – since prices started shooting up around October last year.