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Indian gold sales to soar on strong farm income gold2011

Indian gold sales to soar on strong farm income

De-seasonalised demand for gold is likely to shoot up in India as agriculture income in the country soars. Farmers primed to invest in gold through systematic investment scheme backed by World Gold Council.
Author: Shivom Seth
Posted:  Sunday , 27 Feb 2011  
It is a new scheme to actively support the widespread purchase of gold - rope in the Indian farmer.

In the irrigated north Maharashtra's cotton belt districts of Jalgaon and Dhule, daily arrivals at the Agricultural Produce Market Committee have soared many times over. With farmers having a lot of cash on their hands, many are moving towards buying gold in small quantities rather than investing in farm machinery, say traders.

Even as China has been telling its citizens to buy gold, giving investors access to small term loans, the Indian office of the World Gold Council has also hit on a novel scheme, with officials excited about a revival in the Indian agriculture sector, which has grown to 5.7% of gross domestic product this year.

The innovative investment offering allows the purchase of gold bars and coins through a systematic investment plan (SIP) scheme, which is similar to a recurring deposit.

Every month, on a specified date, an amount that the farmer chooses is invested in the gold scheme. This is to ensure discipline in an investor who can then keep the amount ready for the next month.

``Being disciplined is the key to investing success. With the gold investment scheme, a farmer can commit an amount of his choice to be invested every month,'' said Ramnathan Bukhari of an investment brokerage firm here, which is also selling bullion to its rural investors.

A specific amount can be invested for a continuous period at regular intervals under this plan. SIP is similar to a regular saving scheme and allows the investor to buy gold coins or jewellery on a given date every month.

``Revival in the agriculture sector is good. To re-work on the appeal of gold as an investment avenue for the agrarian community, we are working on some variants of the SIP model,'' confirmed Ajay Mitra, managing director of World Gold Council (WCG) for India.

Several brokerage firms in Mumbai are in the midst of discussions with mutual funds, post offices and micro-finance institutions to push similar gold buying schemes. The World Gold Council has also brought on board around 600 post offices and select micro-finance institutions to retail gold coins and bars to rural buyers.

Trading sentiment for the yellow metal turned bearish on Friday, as it fell from a seven-week high in the overseas markets and retail customers in the suburbs refrained from purchasing at existing high levels. But given the bright outlook foreseen for 2011, with agriculture set to contribute significantly and a general rise in income levels of the agrarian community, gold demand should get a new boost.