Indian demand seen higher ahead of key festival

By Rajendra Jadhav and Swati Verma

MUMBAI/BENGALURU (Reuters) - Demand for gold in India was seen higher ahead of an auspicious day for gold purchases on Friday compared to last year, with lower prices also acting as a catalyst.

"Sentiment is very good in the market. Jewellers are reporting higher footfalls," Somasundaram PR, head of the India unit of the World Gold Council, told Reuters, adding he expected sales to show double-digit growth over the same day last year.

Gold prices were up to 3.7 percent lower on Akshaya Tritiya, the second-biggest gold-buying occasion in India after Dhanteras, which falls in October-November.

"Sales could be 20-25 percent higher than last year. Bullion dealers and retailers were well stocked in advance and we are looking for very good sales in jewellery as well as coins," said Chirag Thakkar, a director at gold wholesaler Amrapali Group in the western Indian city of Ahmedabad.

Bouyant demand from the world's second-biggest consumer could support global prices, which are up about 10 percent so far this year.

Dealers in India were charging a premium of up to $1.50 an ounce this week over official domestic prices, compared with a premium of $1.00 last week. Domestic prices of gold include a 10 percent import tax.

Two-thirds of gold demand in India comes from villages, where investment in jewellery is seen as a hedge in times of distress.

"Demand has improved from rural areas due to good monsoon rains (last year)," said a Mumbai-based dealer with a private bank.

In top consumer China, premiums rose to around $8-$10 an ounce over the international benchmark, from $3-$4 an ounce last week.

"The demand in China continues to be stable. We saw huge gold imports as banks wanted to cash in on the premiums," a Shanghai-based banker said.

China's net-gold imports via main conduit Hong Kong more than doubled month-on-month in March, data showed on Tuesday.

In Singapore, gold premiums were at 50-80 cents, while in Japan prices continued to remain at a discount of 50 cents.

(Writing by Nallur Sethuraman in Bengaluru; Editing by Biju Dwarakanath)