Gold imports skyrocket in Ahmedabad

Gold has been turning out to be the investment of choice by many Indians where imports in Ahmedabad reached a six-year high and gold traders have revealed that the highest demand for the precious metal has come from rural areas.

While a Morgan Stanley research report shows that urban Indians seem to prefer property to gold over the long term, farmers in areas like Ahmedabad are investing heavily in the yellow metal

Author: Shivom Seth
Posted: Monday , 28 Mar 2011
MINEWEB

MUMBAI -

Europe's debt crisis has spurred demand for an alternative investment. And gold is turning out be a investment of choice for most Indians, especially those based in Ahmedabad.

Imports of the yellow metal scaled a six-year high in this Gujarat town, despite the high price. According to figures available, Ahmedabad imported 248.41 metric tonnes of gold till February 2011, as compared to 215.52 metric tonnes that it had imported in the previous financial year.

One has to remember that at that time, prices were way lower. For the last six years, the state has imported ``a very small amount of gold. In the financial year 2008-09, it barely touched 154.73 tonnes. Compare that with the current financial year's import - it is up by 37%,'' said bullion retailer Shivendu Manjade.

Gold traders revealed that the highest demand for gold this year has come in from the rural areas, particularly from the farming community.

``Over the past one year, farmers have minted money by selling out large tracts of land to real estate developers. The money has then been diverted to buying gold,'' said an official of Sonawala Jewellers, a retail outlet in Mumbai, who has had operations in Gujarat for over 3 decades.

However, a different story appears to be playing out in urban India, as compared to rural India. According to a new report, urban India's gold demand is likely to decline 16% in 2011.

A survey done by Morgan Stanley, based on interviews with over 1,600 chief wage earners from middle and high-income households across urban India, has noted that some 30% are not looking to invest in gold over the next 12 months.

While 37% of those surveyed said they are likely to further invest in gold, one-third said they were unsure of making any investment in gold. Two-thirds of those surveyed said that the prices were too high to buy gold.

So, even as farmers in Ahmedabad are selling their land to real estate developers and buying up bars of gold, the Morgan Stanley report has noted that though gold scored over other asset classes as a short-term investment option, 36% found property to be the best investment choice in the long run.

About 60% of the respondents said that property generates better returns and is the safest investment.

On Monday, gold buying in India edged lower, following a weak overseas markets and near record high price. The high price of the yellow metal has been denting demand in the world's largest consumer, resulting in a positive impact on banks' deposit growth, Morgan Stanley has said in its report.

``We believe that the current account deficit can surprise on the downside with positive implications on growth,'' said Ridham Desai, head of India Research at Morgan Stanley, in the report. She added that the current account deficit can fall by 12 basis points to 59 basis points purely due to the fall in gold consumption.

In 2010, consumer demand for bullion in India rallied 66% to 963.1 tonnes by volume from a year earlier, and more than doubled in value to $38.2 billion. Fourth-quarter imports rose to 265 tonnes from 204 tonnes a year earlier.

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