"They are buying, we talk to jewellers, plus they are saying demand is very high. People are planning their wedding purchases ahead of time because they feel that prices may go to Rs 30, 000 they're using that to buy, " said Sunil Kashyap, head of Asia, Scotia Mocatta.
Gold prices have gained a lot more than 25% so far in the year to peak at Rs 27, 989 for each 10 grams on Saturday, continuing its rising trend for eight years inside a row.
Wedding and festival demand will gain pace and peak in Oct before tapering off in December.
"People are spending the same, but the quantity of gold that they are getting is less, " said Kashyap, adding there may a 20% decline in imports this year.
India imported 958 tonne from the yellow metal in 2010.
Scotia is market leader, cornering about 35% of India's imports and operates in collaboration with wholesalers in the united states.
"The perception right now is gold prices are going higher and due to that people are buying. If price keeps on going and filling that expectation you will see continuous demand, " said Kashyap.
However, the risk to continued need, Scotia said, was "If there is a correction, people may just action aside. "
Jewellery demand is likely to witness a revival after a slow pace of growth within the quarter to June. Investment demand grew by as much as 78% in order to 108. 5 tonne, while jewellery demand slowed by 17% to 139. 5 tonne within the second quarter.
"People are buying jewellery as investment, there was a large amount of new buyers who were not buying jewellery but buying gold bars as well as coins, but just in the south people are buying jewellery, so this season we may see some revival in jewellery demand, " he said.
CORRECTION KILLS CURIOSITY ABOUT SILVER
Kashyap said silver imports had shrunk after spectacular sales in the actual first-half to June, adding prices were likely to fall by 18. 5% through current levels to $35 an ounce, driven by a slowdown in commercial demand.
"There is a definite resistance to silver. Once it crossed Rs 50, 000 after which went to Rs 60, 000, a lot of people got stuck along with positions, and the correction from Rs 60, 000 killed many people's curiosity, so there is now less interest as it is considered as the two-way metal, " said Kashyap. "Gold has just moved in one path. "
Silver prices have corrected 32% after peaking to Rs 73, six hundred in late April.
"We had a very strong spurt (in imports) within the first half itself. I would suspect 3, 500-4, 000 tonne (of imports within 2011) on low base effect, " said Kashyap. India imported about two, 800 tonne of the white metal last year.
"The fact silver need is inelastic to price, but here demand itself will not be decreasing due to slowdown, " he said.
Kashyap feels there is lack of the clear laid out policy in India to boost avenues available to list gold investors. Conversely, China has allowed a plethora of retail investment products to boost investments such as as gold deposits, certificates and gold accumulation plans.
"The banks here in India have made representations to the regulator but they have not received any reaction, " he said.