MUMBAI • India's gold demand is expected to rise in the June quarter from a year ago due to a higher number of auspicious days for weddings and a fall in local prices ahead of a key festival, said the World Gold Council (WGC).
A rise in consumption by the world's second-biggest gold consumer could help global prices, currently hovering near a four-month low, but could also widen India's trade deficit and put pressure on the rupee.
"Prices are attractive. In the second quarter, we might see a surge in demand due to Akshaya Tritiya and higher auspicious days for weddings," said Mr Somasundaram PR, managing director of WGC's Indian operations, on Thursday.
Indians will celebrate Akshaya Tritiya next Tuesday, when buying gold is considered auspicious.
Weddings are one of the biggest drivers of gold purchases in India as bullion in the form of jewellery is an essential part of the bride's dowry and is also a popular gift.
This year, the contribution to sales from weddings could rise as the Hindu calendar shows 37 auspicious dates for weddings from just 21 in the second quarter a year earlier, up 76 per cent, Mr Somasundaram said.
Gold consumption in the second quarter last year was 189.2 tonnes, the WGC said. In the first quarter of this year, consumption rose 5 per cent from a year ago to 159 tonnes, also buoyed by more auspicious days for weddings and lower prices.
The report forecast India's gold consumption this year at 750 to 850 tonnes, compared with 760.4 tonnes last year and a 10-year average of 838 tonnes, the WGC said. Gold consumption fell last year after a rise in local prices due to a weak rupee and as drought hit rural demand.
Mr Somasundaram also pointed to a recent drop in gold smuggling over worries that illicit shipments could be caught in seizures of cash, bullion, alcohol and drugs that are aimed at controlling vote-buying in the country's national elections.
India's political parties and their supporters often offer money or goods for votes. The Election Commission tries to prevent this by setting up highway checkpoints to seize cash and other high-value items that candidates avoid mentioning in their expenses due to a cap on the amount they can spend.
However, Mr Somasundaram said smuggling could thrive again after the election due to a 13 per cent gap between local and overseas prices because of India's import and sales taxes, and expectations of healthy demand.
Around 93 to 95 tonnes of gold were smuggled into the country last year, down from 118 tonnes a year earlier, the WGC estimated.