Indian festive demand for gold sluggish, discounts widen

Festive demand for gold in India got off to a tepid start, with local prices still at a heavy discount to the global benchmark, a bad sign for a period when buying is typically strong.

Though sales picked up this week with the onset of the festival season, demand was lower than usual, retailers said, even as jewellers splashed newspapers across the country with ads promising good deals and discounts.

Following the nine-day Hindu festival of Navratri, India celebrates Dussehra on Thursday, when buying of gold jewellery, coins or bars is considered auspicious.

The fourth quarter is typically a strong period for gold purchases in India, the world's second biggest bullion consumer, due to festivals and weddings.

"This year fewer customers are visiting our showrooms compared to last year," said Tanya Rastogi, a director at Lala Jugal Kishore Jewellers in the northern state of Uttar Pradesh.

"For the last two to three years, gold has been giving negative returns. It has badly affected investment demand," Rastogi said.

Still, next month India will celebrate Dhanteras and Diwali, when demand could improve, she added.

Global gold prices are on track to post their third straight annual loss this year, already down nearly 40 percent since hitting a record high in 2011.