ETFs to power gold demand

Aug 27, 2010 |
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Varca,Goa, Aug. 27: India’s gold investment demand may rise 25-30 per cent in the second half of 2010 from a year ago as a shift in preferences from jewellery to exchange-traded funds (ETF), bars and coins gathers pace, the head of a spot bullion exchange told Reuters on Friday.

Indians traditionally buy gold jewellery, which is the most common gift during religious events and an essential wedding present, but buyers are becoming increasingly aware of the benefits of holding gold in other forms.

“Investment will outpace jewellery demand in one to two years as investors have more options like ETF’s and coins,” Mr Anjani Sinha, the chairman and managing director of the National Spot Exchange told Reuters in an interview ahead of a gold convention here. ETFs are instruments that trade like shares and are backed by physical holdings of the commodity. Currently, jewellery accounts for 70-80 per cent of India’s gold demand.

Investors, facing inflation, volatile equities and low bank deposit rates in the world’s biggest buyer of the precious metal, would raise the share of gold in their
investment portfolio to 20-25 per cent in two years from the current 10 per cent, he said.“We expect more investments in to gold from retail and high networth individuals,” Mr Sinha said.

The National Spot Exchange, which started in 2008, is a delivery-based spot trading platform that deals in 24 commodities including gold.

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