Strong marriage-season buying of gold jewellery in India is likely to lift demand for the yellow metal in the world's largest consumer from next month, provided prices do not fluctuate much, traders said on Wednesday.
April and May are generally the busiest months for marriages in the Hindu-majority country with a population of more than one billion.
"We should see very good demand from April to mid-May as jewellers have to replenish inventories and consumers have to buy for their marriage needs," said Ranjeeth Rathod, a bullion dealer based in the southern city of Madras.
"But if prices surge, it would be a complete mess-up. People will cut purchases and wait for a right time to make big buying."
Volatile prices in the past several weeks have prompted jewellers to manage with minimum stocks and many consumers have postponed purchases, traders said. Jewellery accounts for about 85 percent of Indian gold demand.
Spot gold was quoted at $403.00/403.75 an ounce at 0618 GMT on Wednesday, up from $395 about five days ago, but down from a 15-year peak of $430.50 on January 6.
Domestic prices follow global trends because the country imports an average 1.6 tonnes a day to meet 70 percent of its annual gold needs of more than 800 tonnes.
Traders said Indian gold demand would pick up in April and May, but would be lower than the corresponding wedding season of the previous year, when world prices were around $337 an ounce.
Gold jewellery forms an important part of Hindu marriages, as parents gift their daughters the metal for financial security. Hindus consider gold an auspicious metal and like to buy or gift it during religious festivals.
Indian households stock about 15,000 tonnes of gold accumulated over generations. The country has about 300,000 gold jewellery outlets and around three million goldsmiths and ancillary workers.
Rathod said gold demand in Madras might rise to 325 kg a day from about 225 kg now if prices drop into a range of $382-$388.
Traders said demand in Bombay, which accounts for about a quarter of the country's gold demand, could surge to 600 kg per day from 400 kg, while Ahmedabad could witness demand of more than 200 kg against about 150 kg at present at that price range.
"The $400 level has now become a new equilibrium price for Indians. Some years ago, it used to be $280," said Girish Choksi, a bullion trader based in the western city of Ahmedabad, a leading bullion and textiles trading centre.
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