Citigroup (NYSE:C): India Gold Demand Down

Indian imports for gold is down, as surging gold prices has cut down on demand for the precious metal, according to Citigroup (NYSE:C).

“Import data indicates that the surge in gold prices during May appear to be taking their toll,” Citigroup economists said in the report. “Although jewelry demand is typically price inelastic, the run-up in prices has begun to hurt consumption.”

Gold acquisitions in the country dropped by over half, as only 16 metric tons to 17 metric tons were purchased in May, plunging from the 34 metric tons acquired in April.

India has been the largest consumer of gold in relationship to jewelry use, although it really hasn't been a factor in gold prices during the year, although in the wedding season it at times can give it a bump up in price.

Economics is what's driving gold prices now, and that's the reason Indian demand for gold is down. That won't be a factor in the price of gold going forward, but a consequence of it.