India "Will Return" to Buy Gold Even at Record Prices

DEMAND to Buy Gold amongst Indian households – the world's #1 consumers of physical gold – is set to return even as prices hold near all-time record highs, according to both a leading retailer and investment analyst.

After hitting new all-time highs just today, "We are expecting Gold Prices to stabilise at 30,000-31,000 Rupees per 10 grams," said Abhishek Gupta, president of India's largest jewelry retailer Gitanjali Gems, to CNBC-TV18 this week.

"This will increase demand [to Buy Gold ] in the next six month."

Chirag Mehta, a fund manager at the low-cost Quantum Mutual Fund, agrees that Indian demand to Buy Gold is set to grow further, even at these record-high prices.

Speaking to MoneyControl.com, "It takes time for people to adjust to high prices," said Mehta this week.

Indian Gold Prices have risen 230% over the last 5 years. Physical demand by weight, however, was 45% greater in 2011 than in 2006.

"Also, real [bank interest] rates turning positive make fixed deposits attractive," Mehta added. But "the macro-economic and supply-demand drivers point to a continued increase in Gold Prices. Investment demand has been robust and would continue to grow lending support to gold."

Quarterly demand to Buy Gold in India fell to its lowest level in more than two years in the April to July period, according to data from market-development organization the World Gold Council.

Gitanjali Gems last week reported strong profit and sales growth for the
second-quarter of 2012, up 21% and 31% respectively from the same
period in 2011.

"Demand globally hasn't been so bad this year," says Mehta, referring to the World Gold Council's data.

"Only if we compare it with previous year – which was an exceptional year – demand looks a tad lower."

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