“In some areas consumers are selling more than jewelers,” Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation, said today in a phone interview. “They are selling aggressively.”

Gold in India climbed to a record on June 2 after the rupee fell to an all-time low against the dollar, while global prices are down 16 percent from a peak reached in September. The jump in scrap sales adds to evidence of slowing demand in India that may lose its spot as the world’s largest bullion market in 2012 to China, according to the World Gold Council.

“Physical buying is not there, because prices are very high,” said Ketan Shroff, a director with Pushpak Bullions Pvt. in Mumbai. “Everybody is selling. Even retail investors, who had invested at lower levels, are sellers right now.”

Futures for August-delivery rose 0.6 percent to 30,104 rupees ($540) per 10 grams on the Multi Commodity Exchange of India Ltd. at 3:52 p.m. in Mumbai, near last week’s record 30,156 rupees. Global prices for spot gold traded at $1,619.27 an ounce, down from an all-time high of $1,921.15.

Scrap sales in India may more than double to about 300 metric tons in 2012 from 130 tons a year ago, Prithviraj Kothari, president of the Bombay Bullion Association, said on May 29. Gold demand will be “very poor” in the next two months, he said today.

Monsoon Dependence

“Demand in June and July is always very poor in any year,” Kothari said by phone from Mumbai. “Imports are always down as there are no festivals, no marriage season and everything depends on the monsoon and lots of farmers are selling their gold in the market to purchase their new crops.”

India’s gold demand may fall 4 percent by volume in 2012 and gain 4 percent by value, Morgan Stanley said in a May 31 report. Volume demand will decline 13 percent in urban areas and 4 percent in rural areas, it said.

Scrap sales will continue until prices come down, the jewelry federation’s Bamalwa said by phone from Kolkata.

On the National Spot Exchange Ltd., India’s biggest bourse for physical metal contracts, demand for gold and silver fell by about 20 percent to 25 percent this year because of higher taxes and prices, Chief Executive Officer Anjani Sinha said today.

“At this level demand is low,” he said in a phone interview from Mumbai. “It will only pick-up when the marriage seasons starts,” in September, he said.

Gold demand in India fell to 207.6 tons in the quarter ended March 31 from 290.6 tons a year ago, after the government increased import duties, the World Gold Council said on May 17. Investment demand dropped 46 percent and jewelry demand fell 19 percent, it said that day.