Gold imports by India, the world's largest consumer, are expected to take a knock in the coming weeks due to a surge in global prices and the off-season at home.
Traders estimated on Tuesday the imports would tumble by about 66 per cent to 4,000 bars (of 116.64 grams each) per day over the next 15 days from a week ago as buyers watch price movements. India imports 70 per cent of its gold requirements.
Spot gold was trading at $325.35/325.85 an ounce at 0730 GMT on Tuesday, marginally down from the Hong Kong open at $325.70/326.20. But the prices were up from $320.6 a week ago and $272 a year earlier.
"The market is sluggish," said Nayan Pansare, an official of gold trading firm Inter Gold Ltd. "No one wants to buy at the current price as demand has also fallen with the end of the festival season in November."
Traders said the recent rise in global prices was mainly due to political and economic concerns over the impact of military action against Iraq, and weakness
"Prices will largely depend on the Iraq situation," said Rajiv Popley, director of jewellery trading firm Popley Gold. "In case of a military action against Iraq, gold prices may shoot up to $340 an ounce."
Traders said if the crisis was resolved peacefully prices may dip to between $315 and $320 an ounce.
Gold demand in India fell 8.5 per cent to 116.4 tonnes in July-September from the third quarter of 2001. Imports fell 12.4 per cent to 87 tonnes during the period.
Pansare said demand would again pick up from mid-January with the start of the Hindu marriage season, when gold jewellery often forms part of the bride's dowry. The season runs through to May.
Traders said no weddings would take place between mid-December and mid-January in many parts of the country as the period is considered inauspicious in several communities.