Gold imports by India, the world’s biggest importer, could drop for a third straight year in 2010 as record high prices scare off traditional buyers.
Traders expect to spot the first sign of this trend on the Akshay Tritiya festival this Sunday, when demand jumps because it is considered an auspicious time to buy jewellery and coins.
“Forget buying for the festival, on the contrary people are selling,” said Suresh Hundia, president of the Bombay Bullion Association. “There is a queue of sellers.”
Gold is up 12.6 per cent so far this year to record levels on investors' fears about the fallouts of the Greek debt crisis.
The festival sales last year stood at 45 tonnes and traders expect a more-than-50 per cent drop this time as record prices are seen denting demand.
Gold on the Multi Commodity Exchange touched a record of Rs 18,339 (for 10 grams) on Friday, breaching the Rs 18,294 struck on December 3 last year.
But a small and growing number of investors is turning to gold to diversify portfolios and protect against inflation.
“People are allocating 20 to 30 per cent to gold in their portfolios,” said Haresh Acharya, director of Parker Bullion, an Ahmedabad wholesaler.