India's gold and silver imports jump 80% to $31.1bn over six months

Volatility in share markets in India have seen investors switching over to less risky assets like bonds and mutual funds, with a flood of money also pouring into precious metals.

Investors in India appear to be moving out of cash and into gold and silver. As poorly performing equities hit valuations, analysts and traders insist there is an acceleration in the investing community to asset switch into precious metals.

Both the precious metals, gold and silver, recovered sharply in the domestic market on Friday, on fresh buying by stockists and jewellers here. While the yellow metal surged $7.49 to $538.47 for 10 grams, silver rose by around $7.99 to $1051 per kilo.

Traders said revival of buying by stockists and jewellers at existing lower levels was meant to meet seasonal demand and the festival of lights coming up next week, while reports of a firming trend in the Asian region had mainly pushed up both gold and silver prices.

The Indian government recently released its export figures. According to the data released by the government for April to September, imports of gold and silver rose by a whopping 80% to $31.1 billion during six months.

India's exports maintained their growth momentum in September 2011, rising by 36.3% year on year to $ 24.8 billion, though there was a `deceleration' due to uncertainty in the US and Europe, commerce secretary Rahul Khullar was quoted by newswires as saying. Even as India's exports grew at an impressive pace, it has raised hopes of crossing the $300 billion mark for the whole year.

Commenting on India's changing exports basket, the government official said shipments of traditional sectors such as gems and jewellery were declining. Exports of gems and jewellery declined by 17% from 2005 to 2011.

Traders say the ongoing share market losses are dragging down the performance of almost every investment option that includes an exposure to listed shares. ``People feel more safe investing in bullion, which might not be that rocky as compared to stocks,'' said Pradeep Jumla, bullion trader with an investment firm here.

Though there are clear signs of a slowdown, Khullar insisted the good run continues with regards to precious metals. Khullar attributed the rise in imports to asset switching. ``People appear to be moving out of cash and switching to gold,'' he told a group of mediamen.

Talking about diversification of markets, the official said that in the last six years, India's export and import destinations have shifted from traditional markets to new regions. While exports to the North America (the US and Canada) declined to 11% from 18%, the country's shipments contracted to 19% from 22% during the period from 2004 to 2011.

``Earlier, North America and Europe accounted for 40% of the country's exports and now this share has come down to 30%. A gap of 10% is really huge,'' said Satish Mona, an analyst with a brokerage firm.