India's gold imports could hit a new high in 2011 at over 1,000 tonnes, according to World Gold Council (WGC) figures, as demand in the world's biggest consumer recovers from the third-quarter when record prices and erratic markets deterred buyers. India's imports fell 20 percent in the July to September period to just 200 tonnes but should pick up to beat last year's 281 tonnes in the fourth quarter, as buyers invest against the ravages of near double-digit inflation, the WGC said.
With imports totalling 753 tonnes in the first nine months of this year, that would put the full year figure close to 1,034 tonnes - well above last year's record of 960 tonnes and ahead of the highest expectations in an August poll. The current quarter covers the peak festival and wedding season, when Indians traditionally splurge on gold jewellery and investments and the WGC also feels pent-up demand could emerge especially if prices stabilise. "It (imports in the fourth quarter) will be better than last year," Ajay Mitra, India and Middle East managing director at the WGC, told reporters on Thursday. International gold prices rose eight percent in the third quarter while in India, prices soared 19 percent and hit a record 29,212 rupees in November. Uncertainty was exacerbated by a fall in the rupee against the dollar.
"It is not the price but volatility is the concern the middle class in the urban cities has been re-adjusting their budgets and therefore their priorities in (the third) quarter," Mitra said. He said those buyers deterred by the volatility and high prices could return in the current final quarter of the year. "The (WGC) is optimistic that the (fourth) quarter will post positive demand numbers," said Mitra. Indians traditionally buy gold to give on auspicious occasions, festivals and weddings, and it is also a common investment in a country where about half the 1.2 billion population do not have a bank account. With inflation running near double digits, many Indians have come to see gold as a safe investment option, especially given its climb to record highs.
Though investment demand dropped off 18 percent in the volatile third quarter, India was still the largest single market for gold bars and coins in the world, with 78 tonnes of demand at a value of about 196 billion rupees. "The supportive background for Indian demand remains very much in place, with inflation still a concern and price expectations among Indian investors remaining positive," the WGC said in its latest quarterly report, published on Thursday.