Festivals to boost India gold imports:WGC.

MUMBAI: India's gold sales during Oct. 31-Nov. 6, when the country celebrates Dhanteras and Diwali festivals, may rise by up to 40 per cent on year, in turn supporting the outlook for record imports in 2010, a senior World Gold Council (WGC) official said on Thursday.

On Nov. 3 is Dhanteras when jewellers in India register the highest gold sales in a year and on Nov. 5 is Diwali when they buy the yellow metal as a sign of future prosperity.

"It's now an economical decision. The urge among consumers is to capture gold now than later as prices have continuously rallied upwards," Ajay Mitra , managing director of World Gold Council India and the Middle East told Reuters in an interview.

WGC expects demand this year from north India, the region that consumed 16.8 tonnes of gold last year for Dhanteras, to be better than the western region. Western India accounted for 19.6 tonnes of the precious metal last year of the total 56 tonnes.

"The clinching argument, as signalled by the Reserve Bank of India's (RBI) purchase of gold is, there is nervousness, and there is uncertainty in terms of other assets' performance and how the currency markets would be shaping up," said Mitra.

The RBI had bought 200 tonnes of gold in an off-market transaction from the IMF for $6.7 billion at an average price of about $1,045 an ounce at the end of 2009. It made the central bank's gold holdings the 11th largest among its peers.

Gold on the Multi Commodity Exchange (MCX) was trading at 19,446 rupees per 10 grams on Thursday, up 22 per cent on year. The contract had struck an all-time of 20,028 rupees on Oct. 14.

"So far demand has been consistently strong, even the period of Shradh did not take away sheen off gold," said Mitra, referring to the period, when Indians pay homage to ancestors and refrain from auspicious purchases or activities.

RECORD IMPORTS IN 2010:

Mitra expects imports to breach 2007's record of 770 tonnes and to rise to as much as 800 tonnes in 2010. He also expects the buying momentum to continue in 2011.

The World Gold Council, an association of gold miners like Barrick Gold Corp , the world's biggest miner of gold, and AngloGold Ashanti among others, expects imports to exceed 200 tonnes in the last quarter of the calendar year. India imported 539 tonnes in 2009.

"They (investors and consumers) now want safety towards inflation, protect wealth and also think about returns...so gold is the best available option," said Mitra, adding there had been a dearth of options for investment with good consistent returns.

Stocks of gold with jewellers had depleted because of strong demand, which could push premiums higher, Mitra said, adding "Some small traders are bearing the brunt of lack of stocks."

Banks, and jewellery shops, are decorated with marigolds for the festival, and typically open till late evening on Dhanteras and Diwali, when establishments witness the highest footfall.

Gold is one of the regulated sectors in India and the federal government has allowed 23 state-run and private banks to trade in bullion at the wholesale and retail levels. Jewellers also sell coins and bars through retail outlets.

Mitra expects investments in gold exchange traded funds (ETF), now at about 13 tonnes, to rise by double digits in the near-term.

"There has been an active media outburst for ETFs and we have been targeting white-collared consumers, who are looking at easy access to gold," said Mitra.

The gold ETFs are instruments that trade like shares and are backed by physical gold holdings.

Mitra expects more gold investments products by the middle of the next year by financial services firms.

Source : economictimes.indiatimes.com