INDIANS SHY AWAY FROM COSTLY GOLD JEWELLERY

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By P.Vijian

NEW DELHI, Nov 1 (Bernama) -- Gold jewellery is just not glittering in South
India in recent months and even the festive mood has failed to prop up demand.

Jewellery traders in South India, the country's largest gold market, are not a
happy lot these days, as skyrocketing gold prices is dampening sales, ahead of
Diwali later this week and the approaching wedding season.

The gold price peaked to nearly Rs1,968 per gm (RM137.22) last week, against the
backdrop of a weaker American dollar and looming doubts over the global economic
recovery, which has spurred demand from international investors.

Traders from Hyderabad to Chennai and Kerala in South India, share similar woes
of buyers shying away from the yellow metal, despite the long-held tradition of
buying gold ornaments during Diwali -- an auspicious festival to buy as a symbol
of prosperity.

"There is a shift compared to last year. We now see a 30 per cent drop in terms
of quantity, because of rising prices.

"A new phenomenon is also taking place with people now attracted to bullion
gold, diamond and studded jewellery," Praveen Kumar, the Hyderabad Jewellery
Association secretary, told Bernama.

India is the world's biggest gold consumer, importing nearly 800 tonnes
annually, after China.

At least half that quantity is procured by South Indian jewellery makers in
Andhra Pradesh, Kerala and Tamil Nadu, prosperous markets for gold ornaments.

But the high price is certainly pinching the once shiny business, with prices
having almost doubled in the last four years, when gold was previously valued at
about Rs870 per gm (RM60.68) in 2006.

"Obviously demand is dull as common people can't now reach the present price and
with prices of all (consumer) goods being high, it gives them less surplus to
invest in gold," said P.M Thomas of the Thrissur Gold and Silver Merchant
Association based in Kerala.

Kerala alone produces about 500kgs of gold jewellery and Thrissur, one of South
India's jewellery manufacturing hubs, is home to nearly 3,000 producers.

In the affluent metropolis of Chennai, the 650-member Madras Jewellers and
Diamond Merchants Association, established in 1938, is also grappling with
dwindling sales while hoping Diwali would spur buying.

"People will buy at least a bit of gold for Diwali to welcome Lakshmi (Goddess
of Wealth), so there will be some rise in demand.

"Even if the price of an ounce of gold drops, any day is Diwali in the
industry," said an optimist association vice-president, Vummidi Udaykumar.
--BERNAMA



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