>India gold imports may recover to 500 tons in 2010

Mumbai - India's gold imports may recover to 500 metric tons in 2010 but imports will continue to remain below levels seen before the global economic crisis and the subsequent rally in prices, a senior World Gold Council official said late Wednesday.

"I believe 500 tons is the bare minimum that the country needs to import this year," said Ajay Mitra, managing director of World Gold Council India.

WGCI works to promote the consumption of gold in India, traditionally the biggest consumer of the yellow metal.

India's gold demand fell by 33% to 480 tons in 2009, from 712.6 tons the previous year, the council said earlier this week. Out of this, imports accounted for 459 tons, down from an average of 700 tons in previous years, as high prices dented buying interest in the first half of last year.

But demand is stabilizing as consumers get used to higher prices with investor confidence improving amid a global economic recovery.

According to initial data, domestic demand has nearly doubled in January 2010 from the 17 tons bought in January last year, Mitra said.

"January was a very difficult month last year. But demand has been recovering and I think the worst is over. The fourth quarter of 2009 saw an upswing in demand and that has continued into January 2010," he said.

Demand in the fourth quarter rose 13% on year to 180.7 tons, WGC data showed. The recovery in jewelry demand has been sustained by a further correction in domestic prices.

Spot gold in India fell to INR16,500/10 grams in January after touching a record high of INR18,340/10 grams in early December.

Meanwhile, investment demand, which fell by as much as 65% last year, is also looking up in 2010, Mitra said.

"Investment demand this year should be good. (Going by) the number of initial public offerings in the market, there is definitely consumer confidence in investment," he said.

Europe's economic problems, highlighted by the recent turmoil in Greece and the possibility of economic sanctions on Iran will all boost investment demand for gold, he said.

Mitra, however, downplayed the threat of high food prices limiting the purchasing power of Indian consumers and affecting the demand for gold. Rising food prices haven't reduced the demand for other items such as consumer durables and automobiles, he noted. Food prices, a core part of household expenditure, rose 17.94% on year in the week ended Jan. 30.

May Launch New Investment Products This Year

Besides promoting gold sales through regular channels during festivals and other special occasions, the World Gold Council is also looking to launch investment products for Indian consumers by the end of the year.

"We are planning to meet fund managers and investment bankers in mid-March to explore a couple of products," said Mitra. The first product could be ready by the end of the third quarter, provided all regulatory hurdles are crossed by then, he said.

These will be localized instruments, tailored to the needs of investors in metros and tier-II cities. The products haven't been finalized, but gold certificates could be an option.

WGC also has plans to launch a gold accumulation scheme by the second half of 2010. Under the scheme, investors can deposit a monthly or daily amount into a micro-finance company and get an equivalent amount of gold credited to their account.

"Some global players who have products overseas are looking at entering the Indian market with their products. We are in talks with them" on potential partnerships, Mitra said.

Meanwhile, a joint scheme by India Post and WGC to sell gold coins will likely be extended to 1,000 post offices in 2010, up from 553 last year.

On the global outlook, Mitra said $1,000 per troy ounce will now serve as the new floor price for gold. "Prices will move in the $1,000-$1,100 range for the next couple of months."

Source: COMMODITIESCONTROL