MUMBAI, May 31: India, the world’s largest gold consumer, has drastically cut imports as world prices soar due to an escalation in tensions between India and Pakistan and a weaker dollar, traders said on Friday.

Indian imports fell to 1,000-1,500 gold bars (of 116.64 grams each) a day from some 5,000 bars a week ago, according to trade estimates. India imported an average of 13,000 to 15,000 bars per day in 2001.

Spot gold was quoted at $329.25/9.75 an ounce at 1048 GMT on Friday, up from the Hong Kong open at $324.20/4.70 and New York’s last quoted $325.40/5.80. It was traded at about $308 per ounce a month ago.

“Traders are not able to accept these prices. It will take some time for them to digest these levels,” said Viren Vakil, a bullion analyst based in Ahmedabad, a leading gold and textile centre.

Gold has been on a winning streak, gaining about 17 per cent since the start of the year as investors piled into the metal to shield themselves from violence in Kashmir, Afghanistan to the Middle East and from the rocky US stock market and dollar.

Some buying will resume if prices stabilize at any level for more than a week, said Raju Bhai of Kiran Jewellers.

Right now, however, traders are postponing imports as local demand is also poor at the end of the Hindu marriage season and the start of the sowing season following monsoon rains in some parts of the country, they said.

Gold imports rise to 20,000-25,000 bars every day during the marriage season, which generally runs from December to May.

But in the next few months gold demand, especially in rural India, is expected to be poor as marriage buying is almost over and farmers are diverting their funds to buy seeds and fertilizer for planting crops.

Traders said local demand was mostly being met by recycled gold as people were taking advantage of the high prices to sell their old jewellery.

Gold in the Bombay market opened at near six-year highs of Rs63,250 ($1,290) a bar on Friday, up from the previous close of Rs63,050, mainly due to a rise in global prices. It was quoted at about Rs60,400 some two weeks ago.

Domestic prices are derived from global quotes as the country imports about 70 per cent of its annual demand of some 850 tons.—Reuters