India gold demand 'could drive prices higher'

Demand for gold jewelry in India has risen again this week, sparking speculation that a rally could be on the cards for the precious metal.

Despite a slight pullback from the lofty prices of $1,000 an ounce seen last month, demand for gold continues to rise, particularly in the jewelry sector in developing countries such as China and India.

This could help to push prices up, as gold sales continue to outstrip supplies from mines.

One analyst said that he is optimistic for prices in the longer-term.

"The demand is picking up as prices have come down a bit. There could be some more improvement in demand if prices come down to 11,000 rupees per ten grams," said Ashwin Choksi of Jamnadas Choksi, an Indian jeweler.

Recent figures from GFMS stated that gold demand rose by five per cent in 2007, while supply dipped by 0.4 per cent to an 11-year low.

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