MUMBAI (Commodity Online): India’s role in global gold market is big as the country is the biggest buyer of the yellow metal in the world.

But, in the recent past demand for gold has come down drastically in India with imports also witnessing a huge slump.

The only thing now can lift the gold demand is lower prices. The main reasons for Indians staying away from gold is the high prices. They are not ready to buy the yellow metal at very high prices, which are ruling around Rs 14,800 per 10 gm now.

However, World Gold Council has said that if the gold prices fall below Rs 14,000 per 10 gram from the current over Rs 14,800-level the demand may go up.

The council said gold demand in India fell 38% in Q2’09 (April-June) to 109 tonne following high prices and global recessionary pressure. But demand in Q2’09 recovered from the exceptionally low demand of 17.7 tonnes in Q1’09.

Any dip in prices below the stubborn Rs 14,000 per 10 gm level is likely to encourage consumers back to the market.

The report said that there is considerable pent-up demand that could potentially be unleashed at lower prices. 
Jewellery demand, which is the largest component of demand, fell by 31% at 88 tonnes in Q2 against last year.

Although the prices stayed below record high levels in the second quarter, in the first quarter (Rs 16,040 in Feb’09), they were high on a historical basis fluctuating between Rs 14,000-Rs 15,000, which discouraged investors.

Below-average rainfall in June was a further deterrent to gold demand as the rural population is heavily dependent on a good monsoon to boost their agricultural incomes.

WGC said it expected consumers, particularly in India, to look for opportunities to buy back the jewellery that has been recycled over recent quarters.

There are signs of demand revival and according to WGC the upcoming Diwali festival and wedding season should help to underpin a seasonal improvement over the remainder of 2009.

Demand for bars and coins fell by 56% at 21 tonnes in Q2’09 compared to Q2’08.