Mumbai, 27 August 2010

India's gold investment demand, poised to rise as economic growth and adequate monsoon rains boost incomes in the world's biggest consumer of the metal, is expected to be the key theme at an international meet in Goa this weekend.

Delegates attending the conference will also be looking for prospects of a revival in jewellery demand -- particularly in the ongoing festive season -- after India's appetite for gold saw the sharpest fall in a decade in 2009 because of a severe drought.

Early signals of India's festive season demand are positive although international gold prices have been rising on economic worries. Prices touched a record of more than $1,260 an ounce in June as Europe's debt woes burnished gold's safe-haven appeal.

Spot gold touched $1,243.30 on Thursday, its highest since early July, as investors turned to the bullion after the dollar slipped amid worries the U.S. economic recovery was stalling. In India, people have bought gold in anticipation of higher prices in the future, dealers said.

"It has been a better year than last as people are buying on the fear that prices will rise. In coming months also we could see good sales," said Ganesh Agarwal, proprietor of Shiv Sahai & Sons, a wholesaler in Chennai in south India.

Up until August, India's gold imports could be more than 538 tonnes, topping purchases made last year, according to the World Gold Council. India's gold demand surges during key Hindu festivals such as Dussera in October and Deepawali and Dhanteras in November. Dhanteras is India's single biggest gold buying day when people buy the metal to invoke prosperity.

"The feedback from a recent jewellery exhibition was good. Jewellers got many good orders," said Haresh Acharya, head of bullion desk at Parker Agrochem, a large wholesaler in Ahmedabad in west India.

Traders are hopeful the buying trend is here to stay as India sees economic growth of more than 8 percent and good farm incomes after a normal monsoon. Gold jewellery is the most common gift at religious events in India, which accounts for 20 percent of global demand for the metal.

"I think in the investment side, definitely we are looking at it to increase. We can see it currently in terms of the ETF in India. There's really steady investment in it," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

India's gold collections in exchange traded funds (ETF) -- instruments that trade like shares and are backed by physical gold holdings -- rose more than 82 percent on year in July.

PRICE WATCH

Trade members attending the conference said gold price outlook will be key to determining buying levels. "There would be very good buying at $1,200-1,210 an ounce level or 18,100 (rupees per 10 grams)," said Ajit Shinde, director of Magna Projects a wholesaler in Kolkata in east India.

Trade members said if prices fall to about 17,800 rupees to 18,100 rupees, Indians may splurge. However, a higher band, between 18,500 rupees and 19,000 rupees may dampen sales. Members at the conference will look out for forecasts made by analysts such as GFMS, Bank of Nova Scotia and Australia & New Zealand Banking Group Ltd, important observers of India's gold industry.

Industry officials and traders are also expected to ask for interbank trade, warehousing and uniform pricing of gold across the country -- a move that may boost trading and sales.

"Once you have a central warehousing, we would be able to serve semi and rural areas better," said Pinakin Vyas, assistant vice-president with IndusInd Bank in Mumbai.

Ends --

By Siddesh Mayenkar, Reuters - for Commodities Now.