Gold demand in the country jumped by more than a third in the September-quarter, in sharp contrast to the rest of the world, boosted by jewellery demand for the wedding season, the World Gold Council said on Thursday.
Domestic demand climbed up by 39 per cent to 225.1 tonnes in the July-September period of the current financial year, the second highest on record for the quarter, even as global demand fell to its lowest in nearly five years, according to the industry body.
Consumption in China, the world's other major buyer of gold, plunged 37 per cent year-on-year in the corresponding period. Although domestic demand overtook China for the quarter, it still lagged for the total from the first nine months of the year.
Thus, the country once again took over as the world's biggest gold consumer, buying 225.1 tonnes of gold jewellery, coins and bars in the previous quarter, compared to 182.7 tonnes in China.
"Demand will continue to have positive growth over last year as this is a good demand period and a lot of marriages are happening," said Somasundaram PR, head of the WGC's domestic operations.
Jewellery demand in the country rose by 60 per cent in the third quarter, but investment demand dropped 10 per cent.
The WGC maintained its prediction that domestic demand would reach 850-950 tonnes for the year, driven by jewellery purchases.
However, gold investment demand is likely to fall to 25 per cent of total demand this year, from 37 per cent the year before, Somasundaram said, as a sharp price drop has shaken the confidence of investors in bullion as a store of value.
The industry body said jewellery demand was also boosted by a weakening of gold prices in rupee terms and by widespread confidence in the new government, along with the onset of the festival season.
Gold imports for September surged 450 per cent to US $3.75 billion.
"Demand for the fourth quarter as a whole is expected to be healthy, but the September surge in imports is unlikely to be replicated," WGC said.
The jump in domestic demand for gold comes after a weaker period in FY14 when consumption was hurt by curbs on imports.
Struggling with a high trade deficit, the government in the 2013-14 fiscal raised its gold import duty to a record 10 per cent and made it mandatory to export a fifth of all bullion imports.