NEW DELHI –Indians have stepped up gold purchases weeks ahead of the September-October festival season on fears prices will go up too high if they wait for the auspicious days, traders said Tuesday.
Demand has doubled in the past two weeks from the previous weeks, with the strongest purchases happening in southern cities such as Coimbatore, Chennai and Trichy and in Ahmedabad and Mumbai in the west.
Gold sales in India, the world's largest consumer, usually peak during the festival season culminating with Diwali, considered most auspicious for buying and to be celebrated this year on Oct. 26. Indian consumers rarely scramble to buy early as they are doing this time.
"People are scared that gold prices will touch 30,000 rupees -32,000 rupees ($700) per 10 grams by Diwali, so there is panic buying," said Ashish Mundhra, director of Mundhra Bullion Pvt. "Instead of delaying it for the festive season, they are buying it right away."
Pure spot gold was quoting 28,050 rupees per 10 grams in India Tuesday. In international market, it was selling around $1,902.10 a troy ounce, after hitting a record high of $1,912.29 due to safe-haven buying.
"People are thinking that they will miss the bus if they wait any longer," said Girish Choksi, an Ahmedabad-based bullion dealer.
Consumers had paused in buying when prices were just below 25,000 rupees per 10 grams as they were anticipating a correction.
But the buying sentiment changed completely after gold broke that level, Mr. Choksi said. "It was as if the dam just broke."
A weakening of the Indian rupee--it fell about 3% against the dollar in the past one month--is adding to price gains in the local market because it increases the cost of imports.
"Earlier the booking [for gold products] used to happen a few weeks before Diwali, not a few months," said Rajiv Popley, director of Mumbai-based jewelry chain Popley & Sons. "Now they are not waiting for the occasion."
He said there is higher demand for bullion bars and that his company is offering options starting from 1-gram coins to 1-kilogram bars.
Nearly a third of gold bought now is in the form of bars and coins, rather than jewelry which usually accounted for 85%, as people are buying the metal as an investment, Prithviraj Kothari, president of the Bombay Bullion Association, said over the weekend.
He said gold imports in 2011 could easily top 1,000 tons, in line with the expectations of the World Gold Council's India chief executive, Ajay Mitra.
Write to Biman Mukherji at biman.mukherji@dowjones.com and Debiprasad Nayak at debi.nayak@dowjones.com
