Might India's fast-falling stock market impact Gold Prices [1] more than global investment demand...?

IS THE CRUMBLING Indian stock market a bad omen for the booming Gold Bullion [2] market in India?

   The debut of Reliance Industries, India's largest-ever IPO, saw the stock lose 21% of its value this week. Now some analysts say that Gold Prices [3] could also come drastically down if the current stock market mood in the country is any indication.

   The Bombay Bullion Association said that gold sales in India – the world's largest consumer of the yellow metal – fell sharply in January, down by 95% from Jan. 2007 thanks to high prices and volatility in the stock market.

   According to the BBA, gold imports to India in January came down to five tonnes from 62 tonnes a year earlier, as higher Gold Prices [4] sapped demand.

   Varun Mehta, a gold trader and analyst, said that the boom the local Gold Market [5] has been witnessing in the last few months seems to be over.

   "Gold Prices [6] have been going up to such high levels that people now find it difficult to Buy Gold [7] even for auspicious functions like marriage.

   "Gold in India is under tremendous pressure. Traders feel that prices must come down from these high levels."

   Analysts like Mehta feel that if the price of gold falls sharply in India, it would naturally hit the world bullion price, since India continues to the largest consumer for the yellow metal.

   But in a comment to Reuters, George Nickas – a broker with FC Stone in New York – said that while sharply reduced gold jewelry demand from India would weigh on bullion prices, the bull market could be sustained by investors Buying Gold [8] as a safe-haven investment.

   "The people Buying Gold [9] are high net-worth individuals [whereas] people who are selling it are people who are trying to survive the weaker economy. It's unclear where gold is going to go in the near term," Nickas told the news service.