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India gold imports stagnant

NEW DELHI Gold imports into India, the world's largest consumer, have come to a grinding halt with high prices keeping buyers away during the peak wedding season, dealers said yesterday.

"Imports are next to zero," said a trader from Ahmedabad, the country's leading gold importing centre, summing up the mood in the country in the midst of the Hindu wedding season.

Local prices follow global trends as India imports more than two-thirds of its 700-800 tonnes annual gold requirement.

Gold prices in India opened yesterday at Rs69,100 ($1,449) for a bar of 116.64 grams, tracking global prices. It was traded at around 65,000 rupees a month ago.

Prices of the metal hit the highest-ever level of Rs70,350 last Wednesday as global prices surged on war fears, bringing professional bullion trade in the country to a standstill and drawing queues of sellers at jewellery shops.

"The marriage season is at its peak but people's purchasing power has come down with an increase in prices," said Mukul Sonawala, president of the Bombay Bullion Association.

Gold jewellery demand normally rises in India during the Hindu marriage season, which starts in mid-January and runs through to May, as parents give gold as a dowry gift to provide financial security to their daughters.

Gold edged higher yesterday as Washington ratcheted up the pressure on the U.N. Security Council to decide Iraq's fate, but trade was cautious after last week's wild price swings.

Spot gold XAU was at $371.75/372.75 an ounce at 1043 GMT, up from $369.40/370.40 last quoted in New York. Gold blasted to a six-and-a-half year high of $388.50 on Wednesday as investors piled into a metal known as a safe haven in troubled times.

Traders said hardly any imports were taking place in the country now compared with the normal daily levels of about two tonnes.

They said normal imports could resume only if prices stabilised at around $320330 an ounce.

"Everyone in the gold trade and even consumers think that it is a temporary phase, the prices cannot sustain this level," said Sonawala. "Gold has to come down."

Traders said supply of scrap gold had sharply risen as many consumers were tempted by the high prices to sell their old jewellery.

Domestic gold prices were being quoted lower than import prices because of the increased scrap supplies, they said.

"Jewellers in Ahmedabad have advertised in local papers and are selling gold at Rs64,000 a bar, much lower than the prevailing global prices," said gold trader Pawan Chokshi.

Dealers said traders who were holding gold in bullion form were selling it at lower than prevailing prices to book profits.

They were also selling recycled gold, which they had bought from consumers at much lower prices.