Record Gold Cools Wedding Season Demand in India

By Thomas Kutty Abraham

Nov. 26 (Bloomberg) -- Gold imports by India, the biggest buyer, slumped for the seventh month as jewelers and housewives shunned bullion because of record prices, a traders’ group said.

Purchases so far this month totaled about 18 tons compared with 34 tons a year ago, said Suresh Hundia, president of the Bombay Bullion Association Ltd., citing preliminary data.

Gold prices reached a record for a third time this week as a weaker dollar increased the metal’s appeal as an alternative investment and central banks from India and Sri Lanka purchased bullion as a hedge against the U.S. currency. There may be 1.2 million marriages in India between now and Dec. 12, Hundia said.

“Demand in India is nil when it should have been at its peak because of marriages,” he said by phone.

December-delivery futures on the Multi Commodity Exchange of India climbed to a record 17,868 rupees ($386) per 10 grams today and traded at 17,783 rupees at 6:40 p.m. local time. The price must drop to 16,000 rupees to lure buyers, Hundia said.

Global gold consumption was 34 percent lower in the third quarter compared with a year ago, when investors bought bullion as a haven from the economic crisis, the World Gold Council said Nov. 19. It was 10 percent higher at 800.3 tons in the July-to- September period as Chinese demand reached 120.2 tons.

Demand in India advanced 26 percent to 137.6 tons in the quarter ended September compared with the previous three months, while jewelry consumption climbed 27 percent to 111.6 tons from the second quarter, the council said.

Wedding Season

Sales in the wedding season, which runs from September to January, may stay weak as buyers are “yet to digest” the 50 percent jump in prices in the past six months, Harmesh Arora, director of NIBR Bullion Ltd. and vice president of the bullion association, said in a phone interview.

Bullion has gained 34 percent this year as investors seek a hedge against inflation and a weakening U.S. dollar. The price may drop to $1,120 an ounce and a breach of that support level may see gold heading to $1,088, he said.

“A correction is round the corner and may start as early as next week,” Hundia said.

Gold for immediate delivery fell 0.7 percent to $1,183.15 an ounce at 6:41 p.m. Mumbai time. The metal, which moves inversely to the dollar, climbed as high as $1,195.13 after the dollar fell to a 15-month low.

India’s central bank may add to its purchases of gold, the Financial Chronicle reported yesterday. The bank bought 200 tons for $6.7 billion from the International Monetary Fund.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net