Steep increase in investment in gold worldwide

This can be gauged from the fact that there has been a huge 113 per cent increase worldwide in investments in gold from 2007 till November 2010, trade and gold manufacturing sources said.

Investment in gold stood at 353 tons as against 168 tons in 2007 globally in spite of ups and downs in production and volatality of price, the sources told PTI, quoting London based 'Gold Fields Mineral Services' (GFMS).

There has also been a considerable increase in investment of gold through Exchange Traded Funds (ETFs). As far as India is concerned, net value of gold investment through ETFs till October 2009 was Rs 1,169 crore as against Rs 312 crore for the corresponding period last year, they said.

ETFs had dealt with gold worth Rs 2,850 crore till end September 2009 from 2.44 lakh investors, according to the Association of Mutual Funds in India. Over 1.47 lakh people invested in gold through ETFs by March end this year, a 65 per cent increase in six months, they said.

UNO's former financial expert T S Anantharaman said the trend to invest in gold is the result of the global economic meltdown of 2008. He attributed the sudden hike in gold price to the US government's quantiative easing policy and consequent pumping of 600 billion US dollars into the market 'without productive backing' by June next.

He said the U.S. Federal Reserve Board, by Quantitative Easing, has decided to release 600 billion US dollars for eight months since November by re-purchasing Treasury Securities into the market. The main objective of pumping money into the market would be to bring down unemployment and increase general consumption to stabilise the economy,he said.

"Under the circumstances, investors will go for safe and secured instruments of invsetments like gold and hence investing in gold will go up despite skyrocketing prices." Anto Alukkas, Managing Director of Thrissur headquartered Alukas Group, reportedly the world's largest jewellery chain, with over 100 shops in India and abroad, also attributed the spurt in gold investment to global economic meltdown, uncertain economic situation in Europe and weakness of the US dollar.

Kedar Lakshmanan, partner of Bhima and Brothers Jewellers said consumption of gold in the BRIC (Brazil, Russia, India and China) was on a steady uptrend in spite of the global economic meltdown. "However,consumption in the European Union and USA has come down to a great extent," he said.

He said China's consumption of gold has far exceeded the assessment of even the World Gold Council. The nation consumed 462 tons in 2009 and demand has gone up on an average of 13 per cent annually for the past five years, he said. Though China is the world's largest bullion miner, it imported 209 tons in the first 10 months  this year, he said.

"In the present global economic situation, gold is the best bet for safe investment and hence the upward trend in price will continue about three to four years," he said
Managing Director of century-old Kalyan Jewellers, T S Kalyana Raman said the increasing trend of investment in gold was due to easy and immediate liquidity 'anywhere and everywhere' and convenience of investment in small amounts.

He noted that investment in the share market and real estate required huge amounts and lacked liquidity. "When share markets crashed and the real estate boom declined to rock bottom, it took a long time to recover," Raman said.

According to World council figures, there has been a 79 per cent rise in demand in India with consumption of 650.4 tons in the first nine months of 2010, compared to 363 tons for the same period last year

The country's demand for gold in value terms has gone up to Rs 1,13,302 crore from Rs 53,196 crore, registering 113 per cent increase. Trade and gold manufacturing sources said India has become the largest contributor to world jewellery markets. There was a rise of 36 per cent with a consumption of 184.5 tons in the third quarter of this calendar year against 135.2 tons for the same period previous  year, they said.

Rise in gold investment for the past nine months was 108 per cent at 137 tons from 65.8 tonnes for the corresponding period previous year. Consumption of gold jewellery was risen to 73 per cent for the period. Gold jewellery of about 514 tons worth Rs 89,453 crore was consumed in India in the first nine months of 2010 an increase of 105 per cent as against 297.2 tons valued at Rs.43,554 crore the previous year, they said.

Anto Alukkas said 50 per cent of the country's total gold consumption is from the south, of which 15 to 20 per cent is from Kerala. He said there are several gold jewellery making units in Thrissur. About one ton gold is converted to ornaments and other items per day in Kerala of which 85 per cent is processed in the city.

Raman stressed the need to make it mandatory for all dealers to attach price tag and BIS Hallmark to save consumers from being overcharged by jewellers, who make an average profit margin of 15 to 20 per cent per eight gram sovereign. If consumers complain,the margin is reduced to 13 or 14 per cent. A profit margin of five or six per cent on one soverign was 'quite good', Raman said.

Chief patron of the Jewellery Manufacturers' Association P V Jose said there are over 6000 jewellery shops in Kerala, most of which are in Thrissur. He attributed the concentration gold business in Thrissur to the world class craftsmanship and credibility of jewellers. At least 20,000 workers from West Bengal are employed in gold manufacturing units, he said.