India's gold demand to drop 19% in 2012

The World Gold Council (WGC) expects India’s total demand for the yellow metal to be nearly 19% lower in 2012 than last year due to low consumption during the first two quarters, according to

This contradicts WGC`s previous report, which said gold demand in the East Asian nation was on its way up after reaching a 9% increase in the second quarter, the organization’s director of investment, Amresh Acharya, was quoted saying that total demand for gold in India is likely to reach 800 tonnes by end of 2012. Lower than the 986 registered last year.

Though gold demand in India has grown during this year’s festival season, Acharya added that demand for the precious metal was 600 tonnes during first three quarters of 2012, versus 800 tonnes in the same period last year and significantly worse than the 23% increase predicted earlier.

Deputy governor of India's central bank, Subir Gokarn, said over the weekend that the nation is seeking to shrink imports by boosting consumption of paper gold and other gold-backed investment products that don't require physical delivery.

The government has doubled the import tax and recently banned banks from giving loans for gold purchases. These actions, however, have had only a short-term effect as demand picked up after a drop of 36% in the first half of the year ended June 30, according to the WGC.

Buying gold as gifts for weddings, as well as during certain festivals, is considered to be auspicious in India.