Imports may slow as high prices curb demand

India, the world's biggest consumer of gold, may import less of the bullion this year than expected after a rally to the highest in more than two decades curbed demand, the producer-funded World Gold Council said.

Imports may rise to between 800 tonnes and 900 tonnes this year, from 715 tonnes last year, Ajay Mitra, Managing Director of World Gold Council in India, told reporters in New Delhi. That's less than the council's expectation of 1,000 tonnes.

"Due to the spike in prices we are a little cagey,'' said Mitra. "Earlier we were expecting to import 1,000 tonnes, but we may now end up importing 800 tonnes to 900 tonnes.''

Gold rose to the highest in more than 27 years in London today on speculation that higher crude oil prices will increase the appeal of the bullion as a hedge against inflation. Gold is up 19 per cent this year, heading for a seventh annual gain.

India's gold demand almost doubled in the six months ended June from a year ago to 317.2 tonnes as a strong economy sparked jewellery purchases and investment demand, the council said August 15. The South Asian nation's economy expanded 9.4 per cent in the year ended March 31, the biggest gain since 1989.

India's imports in the nine months ended September 30 exceeded last year's purchases, Mitra said.

The country accounted for 27 per cent of gold demand in 2006. Jewellery demand may remain strong with the start of the festive season this month, and opening of more shops retailing jewellery, he said.

Gold for immediate delivery rose as much as $6.80, or 0.9 per cent, to $755.90 an ounce, the highest since January 1980, and traded at $755.9 as of 1:56 pm in Mumbai.