gold in india

Hindu wedding season underway in January traders see demand for gold growing.

BOMBAY, Dec 30 (Reuters) - More and more people in India,

home to the world's biggest gold stocks, are queuing up to sell

their jewellery as prices soar to five-year peaks.

Traders said on Monday they estimate the supply of scrap

metal has jumped four-fold to 50 kgs a day in the Bombay market,

the main consuming centre.

That has squeezed imports and traders say the trend is likely

to continue for the next two weeks if global prices remain high as

domestic demand was dull due to an inauspicious period for Hindu

weddings.

Rajiv Popley, a director of jewellery trading firm Popley

Gold, said the volume of new ornaments sold in exchange for old

gold at his showrooms had almost doubled in the past one month.

"Inflow of recycled gold has shot up as high prices have

attracted many consumers to dispose off their old jewellery,"

said Prithvi Raj Kothari, a gold importer.

Traders buy the metal from consumers at slightly lower than

market prices and sell the recycled gold at below import costs to

jewellers.

"The import business is very poor at the moment," said

Narendra Singh Rathore, a gold trader based in the northwestern

city of Jaipur, a leading gold importing centre. "Traders are

waiting for some stability in the prices before resuming imports."

Spot gold was quoted at $349/350 an ounce at 0720 GMT

in Asia, up from late New York $348.90/349.50 on Friday. It was

traded at about $319 a month ago and at $279 a year earlier.

Local prices track global trends as India imports 70 percent

of its annual gold requirements of 750 to 800 tonnes.

World gold prices have soared on weakness in the U.S. dollar

and political tensions over Iraq and North Korea. Prices of the

safe-heaven metal tend to rise when the dollar weakens as bullion

becomes cheaper to non-U.S.investors.

Popley said traders would feel comfortable to import gold if

prices dropped to $342.

Traders said imports could rise after two weeks, even if

global prices remain firm, as domestic supplies would not be able

to cope with demand when the wedding season starts in January.

Jewellery accounts for about 85 percent of India's annual

demand for gold, and forms an essential part of Hindu weddings as

parents gift the metal to their daughters for financial security.

Gold demand in India fell 8.5 percent to 116.4 tonnes during

July to September from the third quarter of 2001. Imports fell

12.4 percent to 87 tonnes during the period.