Gold imports by India, the world's largest consumer, may drop as much as 50 per cent in December after a plunge in the nation's currency to a record low drove up prices, according to the Bombay Bullion Association.
Imports may total 35 to 40 metric tonnes this month, compared with 70 to 75 tonnes a year earlier as demand remains "dull", Prithviraj Kothari, president of the association, said yesterday by phone from Mumbai. Purchases this year may decline as much as 11 per cent to 850 tonnes from 958 tonnes a year earlier, he said.
Reduced purchases by India may weaken gold prices, which have declined 17 per cent since reaching a record of $1,921.15 (Dh7,056) an ounce on September 6 on growing optimism over an economic recovery in the US and gains in dollar. Gold typically moves inversely to the dollar.
"Inflation is too high and buying is not very aggressive," Kothari said. "Only a decline to the Rs25,000 (Dh1,731) level will spur some buying interest."
Gold for delivery in February on the Multi Commodity Exchange of India Ltd. jumped to a record Rs29,247 per 10gm on December 7. Futures, which has gained 33 per cent this year, traded at Rs27,664 at 3:02pm in Mumbai yesterday.
The rupee is Asia's worst performer this year, reaching a record low of Rs54.305 a dollar on December 15, even as inflation remained above nine per cent for the 12th month in November.