India's gold imports fell an annual 39 percent in May, as record prices hit demand in the world's top consumer at a time when sales were expected to rise because of a Hindu festival.
May imports fell to around 17-18 tonnes from 28.6 tonnes in the same month a year ago, the head of Bombay Bullion Association (BBA) Suresh Hundia, told Reuters on Friday.
He said the provisional data indicated that India's demand would be weak for the rest of the year if prices remain near record levels highs or increase more.
"Imports fell because prices were too high," Hundia told Reuters. "If it stays like this, imports in the full year will fall by 50 percent."
Gold prices in the local market struck several record highs in May on the back of international gold markets and the rupee that weakened against the dollar.
Hundia said demand was weak for the Akshaya Tritiya festival on May 16, the second biggest auspicious day for gold purchases in India after the Dhanteras festival.
But between January and May, gold imports were higher at 142.2 tonnes compared to 100.9 tonnes in the same year ago period, BBA data showed.
This was due to good demand in the first quarter of the year when buyers stepped up because prices were stable.
A large supplier of gold, Afshin Nabavi, head of trading and physical sales in Switzerland's MKS Finance said demand had been low in the last few weeks due to high prices.
"As long as this volatility continues, I think it will remain quiet for India," Nabavi said referring to the sluggish demand.
Other than prices, outlook for 2010 gold imports will also depend on how Indian's annual monsoon rains pan out. The southwest monsoon is a key influence on the farm sector and a good monsoon drives demand for consumer goods and gold.
The June-September monsoon has been forecast to be normal and is likely to hit the southern coast on schedule in the next three to four days.
In 2009, the worst monsoon failure in nearly four decades brought down gold imports to 339.8 tonnes, a 19 percent fall from 2008.
Another fall in gold imports would be the third consecutive year of decline.
Source : in.reuters.com