Why and When Indians BUY Gold + Consumption in 2011 + WGC projections for 2012

We are all aware that India ranks as the largest consumer of Gold globally, accounting for 26% of World’s Gold demand. Household gold consumption has gone from US$19 billion in 2009 to US$45 billion in 2011. Over the past 10 years, Indian household gold consumption has increased at a CAGR of 21% [More than BSE SENSEX or GDP or Corporate Profits] Private ownership of gold is fully US$1trillion. Over the past three years, Gold investments have exceeded equity savings by a factor of 11.

Indian Yellow Metal / Gold Trends in 2011 ?
As per WGC, in 2011, India’s gold demand fell 9% in volume terms. The share of world gold consumer demand fell to 26% in 2011 from a record high of 31.5% reached in 2010. In value terms, gold demand actually grew 8% in 2011 thus accounting for 72% of current account deficit.

Why Indians Buy Gold ?

  • A Big Majority of 35% BUY for Auspicious events like Marriage, Festivals, Baby Naming Cermonies etc
  • 26% BUY it as an Investment or for Value Creation for the Family [Rural India has a higher skew towards life events while urban India is skewed towards investments]
  • 18% Backup for Bad and Rough Economic Times [ Say, your kid is in 12th and you need to pay hefty capitation fee for Professional course, Gold comes in handy if Equities etc are all beatend down]
  • 15% – Gifting Ideas
  • 6% – Just fond of Gold and Impulsive BUYING

When and on What Occasions do Indians BUY Gold ?
Two-thirds of households usually buy gold jewelry for life events. The rest is as shown in the Pie-Chart Below.

13% – When Prices Correct
4% – When they get a Bonus

WGC Projections for 2012
In terms of the quantity of gold purchased, urban households are likely to buy gold equally for investments and life events in 2012. Rural households will likely continue to buy gold for life events. Indeed, the gold buying share for life events should be 12% more than in 2011 at the expense of discretionary demand.

Urban India BUYs more of Gold Bars with rising income levels while Rural India is struck with Jewellery.

In the next article on Gold we will also analyze more on Sensitivity, Buying patterns, Loans, Potential and Returns as the Indians view it.

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