India's gold consumption in the third quarter rose around 16 percent, compared with the same year-ago period, to 164.8 tonnes after a price drop ahead of a religious festival spurred purchases from investors and jewellers, the World Gold Council said.
"Asian investors and jewellery consumers felt comfortable to purchase gold again when it stabilised just below $600 an ounce," said Albert Cheng, managing director for Far East at the World Gold Council. "Looking at the last few months, whenever the price dipped below $600, it bounced back quickly," he told Reuters.
India's jewellery purchases rose 12 percent to 127.8 tonnes in the third quarter as buyers capitalised on lower prices to stock up ahead of the Hindu festival of Diwali in October. Demand for investment in the world's largest bullion consumer increased 31 percent to 37 tonnes.
Gold rallied to a 26-year high of $730 in mid-May on tensions in the Middle East, record-high oil prices and uncertainty over the dollar's outlook. Trading has been erratic since then. The price has moved back and forth around $600 in September and October, and was quoted at $624.25 an ounce by 0544 GMT on Thursday.
The council said in a quarterly survey on demand trends, compiled by precious metals consultancy GFMS and released late on Wednesday, that Indian traders reported an increase of up to 40 percent in Diwali-related sales in 2006.
"A good monsoon should also prove propitious for rural demand in coming months although a limited number of auspicious days for Hindu weddings in the quarter may prove some constraint to purchases in immediate future," it said.
With two-thirds of India's more than a billion people living off farm-related activities, the monsoon plays a crucial role in determining rural incomes and consumer spending for a wide range of goods.
India's religious festivals begin in August and peak with Diwali, the Hindu festival of lights. Indians present gold as gifts during religious festivals and weddings.
China's gold consumption for jewellery and investment rose around 3 percent to 62.9 tonnes in the third quarter of this year. "Stable or steadily rising prices should enable jewellery demand in China to rise further as the end of year and the Chinese New Year approaches," said the report.
"Volatile prices would hamper it," it said. Jewellery demand rose 3 percent to 3.1 tonnes in Hong Kong, a key bullion trading city in East Asia, ahead of the wedding season in the autumn but dealers remained cautious.
"Further, Chinese tourists visiting Hong Kong during the National Day holiday have tended to favour cosmetics and electronic products rather than jewellery," said the report, referring to last month's week-long holiday. Elsewhere in Asia, demand in Indonesia dropped 29 percent to 17 tonnes in the third quarter as volatile prices curbed purchases from jewellers and investors.
In neighbouring Vietnam, a dip in the gold price and the approaching wedding season pushed up jewellery consumption to 6.2 tonnes in the third quarter, an 8-percent rise, the council said.