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Rising Prices Not Lessening Indians' Love of Gold

The surging price of gold has done little to dent India's massive appetite for the precious metal. As Anjana Pasricha reports from New Delhi, India is the world's number-one gold consumer, accounting for about 20 percent of global demand.

When Priyanka Anand, 24, gets married next month, her parents will give her gold bangles, necklaces and earrings worth approximately $5,000. Her mother, Neema, says she has been saving up to buy the ornaments since Priyanka was born.

"I knew that I had to give her these ornaments when she marries, so I did what all my friends and sisters were doing: put by money for the purchases," she said.

India's cultural affinity for gold is legendary. It is a symbol of wealth and prosperity, and an essential part of gifts given to a girl by both her parents and her in-laws at the time of marriage.

Perhaps that is why a 50 percent surge in prices in the last two years has done little to dim the luster of the metal in Indian eyes. It is estimated that two-thirds of the gold consumption is related to weddings, and there are more than 10 million weddings each year in this nation of a billion plus people.

The result: jewelry shops like those in the Gold Souk, an upscale shopping mall in suburban Delhi, say the flow of shoppers never stops. Shop owners say rising incomes in booming India have helped people continue to indulge their love for gold.

STORE OWNER 1: "No impact at all…They purchase it, whatever the price."

STORE OWNER 2: "Business has increased…. Some customers are having particular budget as per weight of gold also, whatever amount they have to spend for that, they will spend."

India consumes about 800 tons of gold every year, which accounts for 20 percent of the annual global demand.

Ajay Mitra, the director of the World Gold Council in India, says the country is likely to remain the world's foremost gold consumer for many years to come.

"Gold is deeply entangled and interwoven in the Indian culture, and there is no custom which is complete without gold jewelry, be it birth of a child or marriage," he explained. "Indians consider it to be auspicious to buy gold, and as long as we remain a cultural country, gold will always be in the forefront."

It is not just prosperous urban areas that are buying gold ornaments. Two-thirds of the metal is snapped up in rural India, where banking services are poor and people are unfamiliar with investment options such as stocks.

Indian households are estimated to have accumulated 15,000 tons of gold, 40 times as much as is held by the country's central bank.