Ahmedabad imported 256.95 metric tonne gold in 2010 even though its price touched Rs21,000 per 10 gram; compared to 2009, gold prices rose by 20%, import volume increased by 70%, and import value went up by 100%
Gold has defied all norms in Ahmedabad. Despite the price of the yellow metal touching Rs21,000 per 10 gram in 2010, gold as much as 256.95 metric tonne — worth Rs50,000 crore — came to the city.
The gold price rose by around 20% in 2010 from Rs17,500 per 10 gram in 2009, but still the import increased by 70%. And this rising volume in import proved the basic rule of economics ‘when price goes up, demand falls’ wrong.
People of Ahmedabad bought gold as much as they could.
In terms of volume, the import increased by 70% in 2010 against 150.80 metric tonne in 2009. In terms of value, the increase was almost 100% to Rs50,000 crore from Rs26,000 crore in 2009. While the average price of the precious metal was Rs17,500 per 10 gram in 2009, it was around Rs20,000 in 2010.
Experts feel that the traditional formula of ‘when price decreases, demand increases’ does not seem to apply to gold. Gold, as always, is considered a safe investment avenue. “Despite rising prices, gold is seen as a good hedge against inflation. The trend where people feared that there would be a correction of around 35% after gold prices went up, has now changed,’’ said Girish Choksi, former president at Choksi Market Association of Ahmedabad.
The figure of 256.95 metric tonne was the highest in the past five years. Only in 2005, the gold import level was 257.66 metric tonne. From 2006 to 2009, the import level saw a decreasing trend but in 2010 the level neared what it was in 2005.
“Gold is still a safe-haven investment as compared to other investment avenues. Even in coming times, we expect gold imports to increase with the price expected to stabilise,” said Manoj Soni of AB Jewels.
Bullion experts feel that gold prices were bound to increase. So the co-relation between price and demand of gold does not hold good. Indian buyers who are usually price-sensitive have expected this price rise.
Said a retail investor, Maya Shah: “I tried to invest in gold as and when I had the provision. Gold is the most safe-haven investment.”
Considering the current trend, experts feel that even in 2011, when gold prices are expected to see new highs, the demand will not be affected, thereby increasing the gold imports.
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