Yellow metal- The shine is here to stay

The demand for gold primarily for investment purpose is poised to rise on the back of constant uncertainty linked to global economic growth and stability. The positive signals that have started emanating from India's festive season demand have once again proved that domestic demand is not deterred by the rising gold prices internationally.  The consumption of gold in the country rose by a whooping 94% to 365 tonnes in the first half of 2010 as against 188.4 tonnes in the corresponding period last year. Simply put, the demand for yellow metal grew 122% in value terms from Rs 27,300 crore to Rs 60,500 crore.

According to a report by the World Gold Council, the global demand for gold will remain robust during 2010 due to apprehensions about the economic recoveries. An investment in gold is an answer to the ongoing search for less volatile and more diversified asset.

India and China will provide the main thrust of overall growth in demand, particularly for gold jewellery. With the Indian marriage season coming up along with festivals like Dhanteras and Diwali, the future seems to augur well for this high priced metal.

Gold prices reached $1260 an ounce owing to Europe’s debt crisis and weakening dollar.  The huge buying in India is in anticipation of higher price in times to come. This buying trend is undoubtedly here to stay as we are expecting a sound GDP growth of more than 8% which should result in abundant domestic liquidity and rise in disposable incomes. The gold price outlook will be the key in determining the buying levels. It is anticipated that there will be a good buying at $1,200-1,210 an ounce level i.e. Rs18,100 per 10 grams. Moreover, if prices fall to about Rs.17,800 to Rs.18,100, people may splurge. This seems to be a rare possibility.  The price of this yellow metal seems set to continue soaring high.