India scrap gold sales up as price near high

MUMBAI Jan 27 (Reuters) - A rise in Indian gold prices to near record levels has led to higher scrap sales as consumers flocked to Mumbai's oldest gold bazaar, after days of lull, to sell their old gold and cash in on the price jump.

"I came to know through TV, they were saying (gold) prices have gone above 14,000 (rupees) since 3-4 days," said 42-year-old Porwal Jain, an ex-army man from Shivaji Park in central Mumbai. "We bought them 20 years back," said Jain, holding a bag, which he said contained "family gold."

"It seems there are chances that prices may fall in 2-3 months, we may think of buying then," added Jain.

Gold prices in India, the world's largest consumer of the yellow metal, was within striking distance of its all-time high of 14,320 rupees per 10 grams, struck on Oct. 10. India recycles about 200 tonnes of gold every year.

"I had bought them around three years back," said a suburban housewife, who did not wish to be identified, as she stood in a queue of around 30 people outside a shop in Mumbai's Zaveri Bazaar.

"You need gold also. You can't depend on imitation jewellery all the time," she added, when asked if she would prefer buying imitation jewellery.

Gold traders say there has been a flow of Indians selling outdated or broken ornaments since prices rose above 14,000 rupees.

Gold on Friday surged to 14,169 rupees, near its all-time high, as volatile currency markets prompted investors to seek refuge in the safe-haven asset. HDFC Bank quoted spot gold at 14,300 rupees per 10 grams on Tuesday compared with 14,045 on Friday.

"Our scraps have doubled to 7-8 kgs since Saturday," said Jitendra Kantilal, a partner with Jugraj Kantilal & Co, a Zaveri Bazaar-based scrap buyer.

IMPORTS SEEN LOWER: India, which consumes 700 tonnes of gold annually, may start the new year on a dismal note due to unsold stocks with banks. Further, more scrap would further restrict demand for new gold bars, the head of a trade body said.

"Around 100 kgs of scrap gold must have landed in the market in two days," said Suresh Hundia, president of the Bombay Bullion Association, at his office a few shops away from Jugraj's, adding "there is no question of good imports."

"There is this scrap coming in. On top of it banks have unsold stock of 12 tonnes of gold, thereby adding to the surplus," he added.

India imported around 402 tonnes of the metal last year, down 47 percent compared with last year as relatively higher prices dented demand further adding to the woes was a weaker rupee, making the dollar-quoted asset expensive locally. (Reporting by Siddesh Mayenkar; Editing by Sunil Nair)