India's 9.5% growth to push gold sales

Gold demand in India is all set to soar in the coming months as the International Monetary Fund has predicted a very high 9.5 per cent growth for the country in 2010.

According to IMF, India's growth will accelerate to about 9.50 per cent in 2010 as robust corporate profits and favourable financing conditions fuel investment, and then settle to 8.50 per cent in 2011.

The 9.5% growth is set to give people more money to buy gold and jewellery. Large domestic demand bases in India, China, and Indonesia, which contribute substantially to Asia's growth, could also provide the region a cushion in the event of external demand shocks, the IMF said.

This means, India and China will lead the world in growth and will have a bigger say in the market especially in bullion. If Indians and Chinese buy more gold, that will make a huge impact on the gold prices in global level.

As Asia's strong recovery from the global financial crisis continues, despite renewed tension in global financial markets, world growth is projected at about 4.50 per cent in 2010 and 4.25 per cent in 2011.

Noting that economic activity in Asia has been sustained by continued buoyancy in exports and strong private domestic demand, the IMF has revised gross domestic product (GDP) growth forecasts for the region upward for 2010, from about 7 per cent in the April WEO to about 7.50 per cent.

For 2011, when the inventory cycle will have run its full course and the stimulus is withdrawn in several countries, Asia's GDP growth is expected to settle to a more moderate but also more sustainable rate of about 6.75 per cent.

In China, given the strong rebound in exports and resilient domestic demand so far this year, the economy is now forecast to grow by 10.50 per cent in 2010, before slowing to about 9.50 per cent in 2011, when further measures are taken to slow credit growth and maintain financial stability, the IMF said.

In a separate Global Financial Stability Report Update, the Fund noted that despite generally improved economic conditions and a long period of healing after the failure of Lehman Brothers, progress toward global financial stability has recently experienced a setback.