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Demand for Gold In India Steady Despite Record Breaking Prices

A woman browses gold waist belts at a jewelery shop during the Akshaya Tritiya festival in the southern Indian city of Hyderabad May 6, 2011.

In India, one of the world’s key markets for gold, demand for the precious metal is expected to remain steady despite record-breaking prices.

As the main festival and wedding season in India approaches -- traditionally September to December -- jewelry shops are stocking new designs and gearing up for brisk business.

Demand for Gold In India Steady Despite Record Breaking Prices
Demand for Gold In India Steady Despite Record Breaking Prices
Some customers want to invest in gold coins for the Hindu festival of Diwali, when it is considered auspicious to buy the yellow metal. Others are following the centuries-old tradition of buying jewelry to give to daughters or daughters in law when they get married.

Many have watched the 25 percent surge in gold prices since the start of the year with trepidation. But that is only prompting them to speed up their purchases.

Anuradha Veer, who is getting married in December, has already gone jewelry shopping for her wedding outfits.

“There is so much uncertainty regarding the prices, it is only going up, Veer says. "The only way I could save myself from the price increases, I bought everything as fast as I could and I did not want to wait any longer because I don’t know where it was going to go.”

Customers like Veer ensure that India retains its position as the world’s biggest importer and consumer of gold despite the high prices. Gold is hovering around $1,750 an ounce after hitting a record high of $1,900 earlier this week.

The World Gold Council says that India bought 540 tons of gold in the first half of this year, up nearly 20 percent compared to the same period last year.

The industry body says this trend is likely to continue due to increasing levels of prosperity in a country where the economy is growing at around 8 percent.

Jewelers are confident that India’s cultural affinity with gold will ensure that sales continue to be robust.

Rajinder Bhola, who has a jewelry shop at the Gold Souk in Gurgaon near New Delhi, says there was some impact on sales when prices shot up to about $1,900 an ounce, but the slight dip is drawing in customers again.

“If it [gold] remains at this price then I see that this coming season the business would not be affected to a large extent,” says Bhola.

Gold has also emerged as a good investment option at a time when stock markets have stumbled, inflation is high and there is fear of another financial downturn due to the debt crises in the U.S. and some European countries.

Bhola says there is a growing demand for gold coins from customers.

“The coin, if they can hold for some time and when the right occasion comes, they can get it converted for jewelry which is required for their children. If they require it later they can buy the latest designs at that particular time.”

The World Gold Council says that driven by India and China, demand for gold is still healthy