Indian Gold Demand Dropping In Cities, But Rural Demand Uncertain

According to a Marketwatch survey of Indian gold buying, consumers in urban areas are scaling back consumption due to higher prices. Less attached to tradition, they're more price-sensitive despite the wedding season being underway.

“Gold has gotten expensive,” said Viki Panjabi, a marketing representative at Popley & Sons Jewellers, on Monday. “We’re seeing a bit of reduced interest.”...

According to a recent survey by Morgan Stanley of wage earners from middle- and high-income households in urban India, demand for gold is waning in cities, with two-thirds of the 1,600 households polled citing higher prices....

Based on its survey, Morgan Stanley forecasts demand for gold in urban India will fall 16% this year.

That’s not to say that gold demand outside of big cities is on the wane, however.

“The Indian population’s affinity to gold is deep rooted, particularly in rural areas,” said the World Gold Council, a gold industry group, in a recent report. “But young middle-class Indians are becoming more international in their tastes and their values and aspirations differ from their parents.”

The end result is a clouded picture of Indian demand this year. If the rurals predominate, demand will be up again this year. If not, demand will slump.