MUMBAI, Oct 31 Reuters Gold prices near record highs could dampen demand in India during the peak festival season and lead to the lowest purchase volumes in three years, the World Gold Council WGC said on Tuesday.

India is the world39;s secondlargest gold consumer, and a drop in purchases could limit a rally in global prices . Falling demand for gold imports could also help narrow India39;s trade deficit and support the rupee

Higher prices in the December quarter, which traditionally sees the highest sales of the year, could cut back purchases, said Somasundaram PR, regional chief executive officer of WGC39;s Indian operations.

Gold demand in India usually strengthens towards the end of the year, which coincides with the traditional wedding season and major festivals including Diwali and Dusherra, when bullion buying is considered auspicious.

Local gold prices jumped this week to 61,396 rupees per 10 grams, near the alltime high of 61,845 rupees hit earlier this year. Last year, prices in the December quarter were nearly 20 lower than this year.

In the December quarter, demand is expected to be lower than last year39;s 276.3 metric tons, Somasundaram said.

Currently, price is a significant influencer. If there is a substantial drop in price closer to Diwali, the entire situation could change, he said. Diwali will be celebrated in midNovember.

Indian gold consumption in the JulySeptember quarter rose 10 to 210.2 metric tons, as both jewellery and investment demand…