Festivals: Indians in a 'gold rush'

The famed Indian appetite for gold is being manifest with renewed vigour this season as a surge in festival demand and a recent fall in prices has fuelled a virtual 'gold rush' in the market.

The current upward trend has particularly been underlined by the country's top bullion trader MMTC Ltd's business outlook for its annual festival of gold exhibition, which is expecting a jump of 40 percent over last year's sales.

"The response this year has been good so far and the coming weekend is expected to bring even more business," MMTC chairman and managing director Sanjiv Batra told PTI.

The festival period, particularly highlighted by the forthcoming Diwali - traditionally considered to be an auspicious time to purchase gold, and the upcoming marriage season is further adding to the already high demand for gold and jewellery products.

Batra said its seven-day gold exhibition, which opened on October 9, is witnessing huge buying this year and total sales could rise about 40 per cent over the previous year's figure when it ends on October 15.

MMTC is estimated to have sold gold worth more than Rs 13 crore (Rs 130 million) in the same exhibition last year. India, which accounts for 20 percent of the world's total gold jewellery demand, is the largest consumer of the precious metal followed by China and Japan.

While the gold prices have gone up sharply when compared to the levels seen a year ago, it has dropped more than 20 per cent in the past few months, creating a perception that gold is cheap now and it is a good time to buy it.

People believe gold might be expensive when compared to years ago, but it is cheap when compared on a monthly radar, he said. However, lower global prices does not mean Indian demand for gold had been weak, particularly in the run up to the festival season, Batra said.

He observed that global prices are not decided by Indian demand alone, though it is an important factor. There are various other factors affecting gold prices, including foreign exchange rate (US Dollar versus Rupee), political situation, demand-supply dynamics and people's perception, Batra added.

MMTC is one of the nodal agencies nominated by the government of India to import gold, silver and platinum for supply to exporters and domestic customers under outright sale, loan and replenishment schemes. Its annual business turnover is expected to cross Rs 20,000 crore (Rs 200 billion) in the year 2006-07.

MMTC is also planning an aggressive foray into the retail sector with its flagship silver brand Sanchi and plans to open more outlets across the country. It also plans to increase the product base by including gold jewellery.