Given the prices currently ruling at a record high, India's gold imports could fall for the third straight year in 2010.
Traders expect to see the first sign of the weakening demand during Akshay Tritiya, the Hindu festival which is considered a good time to buy jewellery and coins. Demand for gold is usually high during the festival.
But this time around far from buying gold people seem to be selling according to Suresh Hundia, president of the Bombay Bullion Association in Mumbai.
Gold prices are up 12.6 per cent so far this year on investor fears that a $1-trillion rescue package to shore up the Greek economy to prevent the crisis spilling over into other European countries would fail or trigger an inflation.
According to traders many Indians are buying smaller quantities or recycling old jewellery while those who can afford to spend more may wait for stabilisation of prices before they choose to buy again.
Hundia said demand had turned to zero in the last four days whereas last year the festival saw 12 tonnes of gold being sold. He added if the prices continued to stay that way there would be very little sold.