MUMBAI—Ravi Chaturvedi was looking forward to giving his wife a gold ring as an anniversary present this January.
But with gold prices stubbornly high in rupee terms, the 34-year-old bank manager says he has changed his mind: He now plans to give her a mobile phone.
It is a telling choice.
Many Indians are either scaling back or eliminating their gold purchases outright. The drop-off in demand is exposing cracks in what gold investors have traditionally perceived as a solid support for global prices.
With many of its religious and cultural traditions steeped in the precious metal, India historically has been the world's biggest consumer of gold, much of it cast into jewelry. Gold plays a particularly important role in wedding ceremonies, and physical demand for gold usually rises significantly in the fall and winter, which are considered auspicious times for getting married.
This year, however, the wedding season dovetailed with a rapid depreciation of the rupee against the dollar as investors fled India amid jitters about the broader economy.
India's imports of gold fell to 20 million metric tons in November, down as much as 75% from a year earlier, according to estimates from the Bombay Bullion Association, an industry group for the country's gold dealers.
Many investors and analysts believe that is a key reason why gold prices haven't bounced back even though concerns about Europe's debt load and the viability of euro persist.
Dollar-denominated gold futures in New York peaked at $1,888.70 an ounce in early August and have since declined by 15%. The price Indians paid for gold, in rupees, continued to rise beyond August, hitting a record 29,270 rupees ($558.59) per 10 grams on Nov. 16 as the Indian currency weakened against the dollar.
Gold futures on Friday eased 0.3% to $1,604.70 a troy ounce in New York, while in India the price of physical gold is up slightly at 27,710 rupees per 10 grams.
In recent years, the market for physical gold has been overlooked as investors focused on its growing popularity as a "safe-haven" asset that retains value during crises and on big positions taken by hedge-fund titans like John Paulson through exchange-traded funds.
But the retrenchment in India shows that trends in physical demand can still exert significant influence on prices. "You have to keep focus on India at all times," said Nelson Saiers, chief investment officer at New York-based hedge fund Alphabet Management LLC, which has about $600 million under management.
If the rupee continues to weaken together with India's economy, "it will hurt the [price] floor on gold," Mr. Saiers said.
Roughly a third of global demand for gold in the form of jewelry, or 649.9 metric tons, came from India in the year ended Sept. 30, according to the World Gold Council.
Ornate necklaces, armlets, earrings, bangles, gold chains and finger rings are an essential part of a Hindu bride's trousseau and are usually bought by her parents.
Shraddha Kulkarni was recently trying on jewelry with her daughter at a shop in Mumbai's Zaveri Bazar gold hub. "We were earlier planning to give about 100 grams of gold jewelry to her, but the high price has forced us to limit it to 70 to 80 grams," Ms. Kulkarni said.
Vasu Acharya, a director at Parker Bullion, based in the western city of Ahmedabad, said demand was slack. He said sales were running at 20% of last year's levels.
"If gold demand is like this now, I shudder to think what it will be in January" after the end of the wedding season, which lasts until the middle of the month, Mr. Acharya said.
Some analysts, however, argue that the drop in demand is temporary, and represents Indian consumers postponing gold purchases.
Buyers in India "are apparently anticipating a larger decline in prices and are reportedly holding out for such an eventuality," Kitco Metals Inc. North America's senior metals analyst Jon Nadler said in a note to clients.
That is the strategy Sumitra Jain opted for, saying she would only buy part of her daughter's wedding-jewelry requirement now and wait for a further decline in prices to buy the rest.
Indian jewelers are trying to attract customers by shifting to lightweight jewelry from heavy gold ornaments. Some also are trying to woo customers with offers such as an option to lock in the lowest price between the booking day and the delivery date.
Daman Prakash, a director for MNC Bullion, a trading firm based in the southern city of Chennai, said he expects to see more demand from retail customers when prices fall to 26,000-27,000 rupees per 10 grams.
—Biman Mukherji contributed to this article.
Write to Debiprasad Nayak at debi.nayak@dowjones.com and Tatyana Shumsky at tatyana.shumsky@dowjones.com
