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D epreciating rupee and high gold prices have jointly forced to India to cede its long-held position as the world’s No. 1 con-sumer of the precious metal to China in October-December.
India and China together account for more than half of total global demand for gold, with demand from India typically surpassing that of China’s. But the fourth quarter of 2011 registered a change in the trend.
According to World Gold Council data, total demand for gold in India was 173 tonnes in October-December, down 42% from a year ago. Demand in China, on the other, increased marginally from a year ago to 190.6 tonnes.
While both countries registered high inflation, particularly in the first half of 2011, weakening of the rupee against the US dollar dampened demand for gold in India.
In October-December, while gold prices rose 23.5% in dollar terms from a year ago, in rupee terms, gold prices shot up a whop-ping 39%.
Rupee depreciated 8.4% versus the dollar during the quarter, while the Chinese yuan that appreciated 0.2% in the same period.
On December 16, rupee weakened to its all-time low of `54.30 versus the dollar.
Impact of rupee depreciation is also reflected in the fact that while international gold prices (in dollar terms) fell 0.8% in October-December on a sequential basis, Indian prices were up 8.8% dur-ing the same period.
In the quarter that went by India’s jewellery demand nosedived 44% from a year ago to 103 tonnes and investment demand plunged 38% to 70 tonnes.
It was mainly depreciation of rupee in the second half of the year that resulted in India’s gold demand during July-December weak-ening 33% from the first half.
Traditionally, demand across the globe and particularly in India peaks in the last quarter as a number of festivals including Dusserra, Diwali, Christmas and New Year and the wedding sea-son fall in this quarter.
Recycled Gold Supply Dips In 2011
G old is supplied mainly through mine production and recycled gold. In 2011, both these witnessed divergent trends. While mined production rose 4% and reached an all-time high, recycled gold supply contracted 2%.
Recycled gold supply fell despite higher prices. But this decline was restricted mainly to developing markets like India, China and Turkey. These markets have comparatively been more active in recycling gold than Europe, the US and Japan.
Global Demand Surges
F or the first time ever, global demand for gold in value terms exceeded $200 billion in 2011, according to the WGC’s latest report.
Global demand in terms of quantity rose to 4,067 tonnes in 2011, the highest tonnage since 1997, the report said.
While demand in quantitative terms was marginally up, in value terms demand surged 28.8%. This is because of a sharp increase in price of gold during the year.
Investment demand — represented by bars and coins and ex-changed traded funds and similar products — registered acceler-ated growth during the year. This demand was underpinned by:
Financial crisis in the euro area
High inflation in some countries as gold is considered as a safe hedge against inflation by some countries
Weak returns by alternative investment avenues
Key markets that drove investment demand in 2011 were India, China and Europe.
India Remains Top Gold Importer
I ndia remains the largest importer of gold on an annual basis with the country importing 933 tonnes in 2011. While China recorded a robust 20% growth, its total demand was way behind India’s at 769.8 tonnes.
India remained the top importer of gold despite rising gold prices and weakening of the Indian rupee against the dollar in the second half of the year.
India’s demand for gold touched `2,20,507 crore in 2011, up 22% over the previous year, which in turn was up 98% from 2009.
India traditionally has been investing in gold in the form of jewel-lery. However, given the high gold prices, jewellery demand in India dipped 14% to 567.4 tonnes in 2011 from the previous year. Demand for gold coins and bars rose to 366 tonnes, up 5%.
China’s jewellery and investment demand for the full year stood at 82% of India’s demand. Until recently, China’s demand was only about half of India’s demand.
Gold Continues Bull Run
I n 2011, gold prices surged to a record high of $1,895/troy ounce in September. Financial crisis in the euro-zone and the US, together with weak global economic situation led to demand for gold — considered a safe haven investment option — rising sharply.
Volatility in gold prices in 2011 resulted in price averaging at $1,571.5/troy ounce, up 28.3% from a year ago.
Prices in India touched record highs too. Gold prices averaged 31.3% higher from the year-ago level.
G iven the weakening demand for gold in India in the last quarter of 2011, many analysts see it as sign of medium-to-long term demand exhaustion. However, World Gold Council in its release states that investment demand is yet to reach its poten-tial.
Slide in prices of gold in October-December from the record highs touched in July-Sepetmber was also a result of profit book-ing. Also, threat of inflation and low real deposit rates (deposit rates minus inflation) in emerging economies and ongoing debt crisis in some nations will push up demand for gold.
"On India, I think near-term it may have peaked with a flat year in prospect of tonnage, but medium-term the India growth, wealth and urbanisation story is intact and we expect new highs in de-mand," said Marcus Grubb, managing director, investment, WGC.
Nomura in its latest report states: ―A continuation of this trend should augur well for India’s current account balance. In the 12 months ending October 2011, India imported $51 billion of gold. If not for gold imports, India would have recorded a marginal current account surplus. Lower gold imports are also a good lead-ing indicator of inflation. High inflation expectations encourage people to shift to gold as a store of value. Given its limited sup-ply, prices rise immediately. In contrast, WPI inflation only gradually adjusts higher. The fall in gold demand, therefore, sug-gests that inflation expectations have moderated, which should lower headline WPI inflation in the coming quarters.‖
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D epreciating rupee and high gold prices have jointly forced to India to cede its long-held position as the world’s No. 1 con-sumer of the precious metal to China in October-December.
India and China together account for more than half of total global demand for gold, with demand from India typically surpassing that of China’s. But the fourth quarter of 2011 registered a change in the trend.
According to World Gold Council data, total demand for gold in India was 173 tonnes in October-December, down 42% from a year ago. Demand in China, on the other, increased marginally from a year ago to 190.6 tonnes.
While both countries registered high inflation, particularly in the first half of 2011, weakening of the rupee against the US dollar dampened demand for gold in India.
In October-December, while gold prices rose 23.5% in dollar terms from a year ago, in rupee terms, gold prices shot up a whop-ping 39%.
Rupee depreciated 8.4% versus the dollar during the quarter, while the Chinese yuan that appreciated 0.2% in the same period.
On December 16, rupee weakened to its all-time low of `54.30 versus the dollar.
Impact of rupee depreciation is also reflected in the fact that while international gold prices (in dollar terms) fell 0.8% in October-December on a sequential basis, Indian prices were up 8.8% dur-ing the same period.
In the quarter that went by India’s jewellery demand nosedived 44% from a year ago to 103 tonnes and investment demand plunged 38% to 70 tonnes.
It was mainly depreciation of rupee in the second half of the year that resulted in India’s gold demand during July-December weak-ening 33% from the first half.
Traditionally, demand across the globe and particularly in India peaks in the last quarter as a number of festivals including Dusserra, Diwali, Christmas and New Year and the wedding sea-son fall in this quarter.
Recycled Gold Supply Dips In 2011
G old is supplied mainly through mine production and recycled gold. In 2011, both these witnessed divergent trends. While mined production rose 4% and reached an all-time high, recycled gold supply contracted 2%.
Recycled gold supply fell despite higher prices. But this decline was restricted mainly to developing markets like India, China and Turkey. These markets have comparatively been more active in recycling gold than Europe, the US and Japan.
Global Demand Surges
F or the first time ever, global demand for gold in value terms exceeded $200 billion in 2011, according to the WGC’s latest report.
Global demand in terms of quantity rose to 4,067 tonnes in 2011, the highest tonnage since 1997, the report said.
While demand in quantitative terms was marginally up, in value terms demand surged 28.8%. This is because of a sharp increase in price of gold during the year.
Investment demand — represented by bars and coins and ex-changed traded funds and similar products — registered acceler-ated growth during the year. This demand was underpinned by:
Financial crisis in the euro area
High inflation in some countries as gold is considered as a safe hedge against inflation by some countries
Weak returns by alternative investment avenues
Key markets that drove investment demand in 2011 were India, China and Europe.
India Remains Top Gold Importer
I ndia remains the largest importer of gold on an annual basis with the country importing 933 tonnes in 2011. While China recorded a robust 20% growth, its total demand was way behind India’s at 769.8 tonnes.
India remained the top importer of gold despite rising gold prices and weakening of the Indian rupee against the dollar in the second half of the year.
India’s demand for gold touched `2,20,507 crore in 2011, up 22% over the previous year, which in turn was up 98% from 2009.
India traditionally has been investing in gold in the form of jewel-lery. However, given the high gold prices, jewellery demand in India dipped 14% to 567.4 tonnes in 2011 from the previous year. Demand for gold coins and bars rose to 366 tonnes, up 5%.
China’s jewellery and investment demand for the full year stood at 82% of India’s demand. Until recently, China’s demand was only about half of India’s demand.
Gold Continues Bull Run
I n 2011, gold prices surged to a record high of $1,895/troy ounce in September. Financial crisis in the euro-zone and the US, together with weak global economic situation led to demand for gold — considered a safe haven investment option — rising sharply.
Volatility in gold prices in 2011 resulted in price averaging at $1,571.5/troy ounce, up 28.3% from a year ago.
Prices in India touched record highs too. Gold prices averaged 31.3% higher from the year-ago level.
G iven the weakening demand for gold in India in the last quarter of 2011, many analysts see it as sign of medium-to-long term demand exhaustion. However, World Gold Council in its release states that investment demand is yet to reach its poten-tial.
Slide in prices of gold in October-December from the record highs touched in July-Sepetmber was also a result of profit book-ing. Also, threat of inflation and low real deposit rates (deposit rates minus inflation) in emerging economies and ongoing debt crisis in some nations will push up demand for gold.
"On India, I think near-term it may have peaked with a flat year in prospect of tonnage, but medium-term the India growth, wealth and urbanisation story is intact and we expect new highs in de-mand," said Marcus Grubb, managing director, investment, WGC.
Nomura in its latest report states: ―A continuation of this trend should augur well for India’s current account balance. In the 12 months ending October 2011, India imported $51 billion of gold. If not for gold imports, India would have recorded a marginal current account surplus. Lower gold imports are also a good lead-ing indicator of inflation. High inflation expectations encourage people to shift to gold as a store of value. Given its limited sup-ply, prices rise immediately. In contrast, WPI inflation only gradually adjusts higher. The fall in gold demand, therefore, sug-gests that inflation expectations have moderated, which should lower headline WPI inflation in the coming quarters.‖
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