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MUMBAI, May 17

THE country's gold demand fell by as much as 40 per cent in the first quarter of 2002 to 149.8 tonnes following a sharp rise in prices at the beginning of February, the World Gold Council (WGC) said in its latest quarterly review Gold Demand Trends.

Detailing the reasons for decline, the report pointed out that high level of stocks at the beginning of the quarter and the impact of global slowdown (particularly in the infotech sector which resulted in poor sales of consumer goods generally) were also contributory factors. Unrest in Ahmedabad also hampered offtake in that region.

Indian demand in the first quarter of 2001 was especially strong at 249.7 tonnes, making year-on-year comparison difficult.

Official gold imports into the country in Q1 this year were 84.7 tonnes (182.1 tonnes Q1 2001). The difference between official imports and overall demand is met by other imports and recycled scrap gold, the report clarified.

According to WGC, Indian demand is always sensitive to price volatility. Sharp increases always choke off purchases of new gold for a while until consumers and the trade feel that the price has settled down. The gold exchange market where one can exchange an old piece of jewellery for a new one was said to be active in the current year.

In contrast to India, demand was strong in Pakistan, China, South Korea, Malaysia, Vietnam and the UK. The most striking feature of the quarter was the surge in retail investment spending in Japan. Purchases rose to 47.5 tonnes, a four-fold increase. However, price sensitive markets West Asia and Thailand saw demand decline.

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