NEW DELHI -- Normal monsoon rains would boost farmers' income and slow the decline in India's gold imports this year, but below-normal rains would result in 2012 gold imports plunging by around 40%, the head of India's leading gold trade body said Monday.
Total imports would likely total 750-800 metric tons in 2012 if the weather department's forecast for a normal June-September monsoon season proves accurate, said Prithviraj Kothari, president of Bombay Bullion Association.
"If for some reason the monsoon is below normal, then the gold demand will be no more than 600 tons this year," Mr. Kothari said.
India, the world's largest gold consumer, imported 969 tons of the precious metal last year.
India's demand for gold has been hit by higher prices due to a combination of higher global prices, a weaker rupee and new taxes on gold introduced in the federal budget in March.
Monsoons are crucial to India's gold demand because they play a big role in determining farm incomes. Most farmers prefer to invest their savings in gold.
The Indian government's weather department has forecast a normal monsoon during the June-September season. The season brings about 70% of the annual rainfall in India, where more than 60% of farmland is rain-fed.
However, there is a slim chance an El Nino could form in August, which would limit rainfall, weather department officials said.
Mr. Kothari said gold demand in Mumbai, the country's trading hub for precious metals, has plummeted to 200-300 kilograms a day, compared with 1-1.5 metric tons a day last year.
"Prices are too high in the local market. Indian prices are quoting close to all-time highs at a time when international rates are off their peak rates by around $280 an ounce," he said, citing the rupee's depreciation.
Domestic gold prices are currently around 29,500 rupees for 10 grams. At 0444 GMT, spot gold was at $1,637.83 a troy ounce, down $4.27 from its previous close.
The rupee was near a four-month low around 53.35 to the dollar.
"If the rupee depreciates further to around 54 rupees to the dollar, then [domestic] gold prices could test new highs and cross 30,000 rupees/10 grams," Mr. Kothari said.
Write to Biman Mukherji at biman.mukherji@dowjones.com
