FOCUS-Gold coins, bars set to outshine Indian jewellery

By Siddesh Mayenkar & Sourav Mishra

MUMBAI, Oct 21 (Reuters) - Gold investors in India, the world's largest consumer, are likely to outstrip jewellery buyers in 2-3 years with the economy on the rebound and buyers seeking new ways to protect their investments from pilferage.

"The signs of heavy increase in investment demand are visible and may outperform jewellery demand in 2-3 years" said Anjani Sinha, president of Indian Bullion Market Association (IBMA), which represents about 10,000 jewellers across the country.

"We may see 20-30 percent rise in investment demand driven by the new class of investors. Even during this festive season, demand for coins was more compared to jewellery, strengthening the trend."

India just finished its peak festive season that starts in August and ends in October.

IBMA said it has sold 7,000 coins of 8 grams each since August and hopes to target 100,000 coins within one year.

India has traditionally been a jewellery-devouring country, with the important part gold jewellery plays in marriages and other family celebrations.

But the trend started to change in 2003, when gold coins and bars were allowed to be sold by licensed banks and some traders. In 2007, investment demand jumped 11 percent to 215.4 tonnes.

Even in 2008, when Indian imports fell 7 percent to 712.6 tonnes at the onset of a global economic slowdown and high prices, investment stayed steady at 2007 levels.