India gold demand spike may make up for weak year

By Ruchira Singh

MUMBAI (Reuters) - A spike in India's gold demand has made up for the poor sales earlier and raised hopes the year may end up nearly matching last year's 769 tonne imports, bullion industry members said on the sidelines of a conference on Sunday.

"There is a strong possibility that a sizable chunk (of the fall in demand earlier) would have been covered up," said Rajan Venkatesh, managing director -- India bullion at ScotiaMocatta.

Foreign gold prices, that guide the local market, touched a record $1,030.80 an ounce on March 17 amid a credit market crisis in the U.S. Prices then fell to a 11-month low to $736 an ounce on Sept. 11.

"I think it (full year's imports) should be more or less the same, if not higher, because the demand has been very good over the last six to eight weeks."

In the first half of the year when gold rallied to life highs, India's imports fell 47 percent on year to 263.5 tonnes, data from the World Gold Council showed.

But dealers and traders said a plunge to 11-month lows earlier this month that coincided with the onset of Hindu festivals, escalated buying in a big way.

"There are financial market problems and prices are up, but demand is also rising," said V.K. Khanna, general manager, treasury and international banking at Union Bank of India. "April onwards, we have already imported 26 tonnes."

Khanna said the bank aimed at doubling its imports to 70 tonnes in the current fiscal year to March for wholesale and retail bullion products.