India biggest consumer of gold

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MUMBAI-- Despite near-record prices, Indian consumers flocked to jewelry shops on Wednesday to buy gold to celebrate the Hindu festival of Dhanteras, believed to be the most auspicious day of the year to buy gold.
Demand for gold usually picks up ahead of Dhanteras, which marks the beginning of the five-day Diwali festival. India, the world's largest consumer, imported around 559 metric tons of gold in 2009, of which 56 tons were sold during the week of Diwali, according to the World Gold Council.

Pure gold was trading 19,750 rupees ($446) per 10 grams in Mumbai Tuesday, down from its all-time high of 19,975 rupees in early October. Some traders were expecting high prices this year to hurt demand during the festive season.

Still, there were long queues outside most stores of Mumbai's main jewelry bazaar, according to Prithviraj Kothari, director of the Bombay Bullion Exchange.

Demand is expected to be higher in the evening as office-goers will also to make their festival purchases, jewelers said.
India's gold imports in October rose to 44 tons from 36.2 tons a year earlier as jewelers stocked up for Diwali, according to the Bombay Bullion Association.

Mr. Kothari said high imports were an indication that demand would improve this year.

Meanwhile, a large number of consumers are choosing to buy gold and silver coins and bars rather than heavyweight jewelry.
Ashish Pethe, a partner of jewelry chain Waman Hari Pethe, said people are expecting prices to rise further and hence stocking up gold at current prices.
"In the last 10-15 days, we have seen that the percentage of people going in for coins is rising from the historical average of 10%," Mr.Pethe said.
Mr.Kothari said consumers were chosing gold bars because these can be exchanged for jewelry later. He added that demand is expected to remain strong as the "wedding season" is expected to start later this month.

Demand has been good so far with around two in ten customers buying coins and bars, said Trimuthi Zaveri, a partner of Mumbai-based Tribhovandas Bhimji Zaveri.
S.K. Jain, president of the New Delhi-based Chandni Chowk Jewellers' Association, said sales volumes this Diwali will be "on par with last year's" though some people may buy white goods due to high gold prices.

Vinod B., sales manager at a human resource company in Mumbai, said he used to buy gold coins during Diwali, but prices are too high this year to continue the practice. "I am thinking of buying a cellphone instead."
 
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