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Tuesday, 17 September, 2002, 13:59 GMT 14:59 UK
India loses its golden shine
Zaveri bazaar
Indian customers shy away from high prices
A dramatic slump in jewellery buying in India has caused demand for gold to fall across the world.

India is the world's largest consumer of gold, but its purchases of the precious metal dropped by more than 40% during the three months to June.

That sharp decline caused global demand for gold to fall by 14% during the quarter.

But it is not all bad news for the mining firms and gold-producing countries.

The reluctance to buy gold has been primarily caused by high prices, with gold hitting two-and-a-half year highs of $330 an ounce.

Supply and demand

"Demand for gold cannot escape the laws of economics any more than any other product," said Jill Leyland, senior economic adviser at the World Gold Council (WGC).

And the WGC suggests that Indian buyers are especially sensitive to price changes.

Fears over a poor harvest, as well as political worries and the fragile world economy, have also contributed to a lack of consumer confidence to buy gold.

But other countries in Asia did not reflect the gloomy trend seen in India.

Alternative to shares

Industrial demand in East Asian countries was universally higher than a year earlier, while enthusiastic buying of jewellery in Vietnam and Indonesia lifted demand significantly in those countries.

Gold prices fell to their lowest level in two weeks on Tuesday, on a combination of the WGC report and the diminished risk of war with Iraq.

Gold prices had been rising steadily as investors have bought the precious metal as a safe haven alternative to plummeting stock markets.

 WATCH/LISTEN
 ON THIS STORY
Rhona O'Connell, World Gold Council
The oulook for gold prices
See also:

02 Jul 02 | Business
27 Jun 02 | South Asia
22 May 02 | Business
26 Feb 02 | Business
15 Aug 02 | Business
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