India's Gold Bullion Demand to "Remain Strong"

Gold Bullion demand from India is likely to benefit from strong economic growth over the next decade, according to a leading Indian economic research institution.

Mahesh Vyas, managing director of the Centre for Monitoring Indian Economy (CMIE) said:

"Our macroeconomic forecast to 2020 shows India is poised for a very strong period of economic growth and this has significant, positive implications for all forms of gold purchasing in India...we predict that new demand for gold will be driven by rapid GDP growth; urbanization; the emergence of a strong middle class; and a sustained and potentially rising savings rate of 30-40% of income."

He added that CMIE’s findings "endorse the fundamental strength of the Indian gold market".

There have been fears that high Gold Prices could, in the short-term, curb demand from India, where it is currently the middle of the wedding season. A Morgan Stanley report this week listed as one of its conclusions that "gold appetite in India seems to be waning as prices are too high."

The report also noted that "Indians appear reluctant to sell gold and will only consider doing so in a severe financial crunch."

However, the signals are conflicting, with some traders reporting that demand is holding up.

"Despite higher prices, the wedding season demand is there in the market," said one dealer with a Gold Bullion importing bank.

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