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Gold Imports by India Drop 20% as Record Prices Deter Buyers

Gold imports by India, the world’s largest bullion consumer, declined 20 percent in the third quarter after record prices deterred jewelry buyers and investors, according to the World Gold Council.

Overseas purchases dropped to 200 metric tons in the three months ended Sept. 30 from 250 tons a year earlier, the London- based producer funded group said in a report today. Demand for gold jewelry dropped 26 percent to 125.3 tons, while purchases of coins and bars for investments declined 18 percent to 78 tons, it said.

Global gold demand increased 6 percent in the July- September period to 1,053.9 tons as China, the second-largest consumer, helped boost investment and jewelry usage, the council said. Gold is rallying for an 11th year, gaining 24 percent, as investors seek to protect their wealth from declining equities, depreciating currencies and the threat of inflation.

In India, “gold jewelry demand was sluggish during the seasonally slow months of July and August,” the council said. Demand failed to recover subsequently as “heightened volatility” in prices damped consumer interests, it said.

Bullion for immediate delivery declined 0.2 percent to $1,760.10 an ounce at 8:37 a.m. in Mumbai. The December-delivery contract declined 0.5 percent to 28,864 rupees ($569) per 10 grams on the Multi Commodity Exchange of India Ltd. Bullion reached a record $1,921.15 an ounce on Sept. 6

Rupee Depreciation

“Prices were exaggerated in the local market by a depreciation in the rupee against the U.S. dollar,” the council said. “Inflation of almost 10 percent as measured by the wholesale price index, adversely affected jewelry demand, through its impact on both disposable income levels and general consumer sentiment.”

The rupee has weakened 3.6 percent since Sept. 30 to 50.76 per dollar, approaching a record low of 52.18 reached in March 2009, while the benchmark wholesale-price index gained 9.73 percent in October from a year earlier, exceeding 9 percent for the 11th straight month.

“The remainder of 2011 should see demand pick up as the festive and wedding season encourages a recovery in demand,” the council said.

Gold demand in India surged 66 percent to 963.1 tons in 2010, while imports were a record 958 tons, according to the council.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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