India's gold demand is expected to soften in the September quarter as record-high local prices dampen buying in the world's second-biggest consumer of the precious metal, the World Gold Council (WGC) said on Thursday.

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The fall in consumption could weigh on global prices that have risen nearly 10 percent so far in 2019, but could help in bringing down the south Asian country's trade deficit, supporting the rupee.

Rural distress, higher prices and a hike in India's import tax could dampen demand during the September quarter, said Somasundaram PR, the managing director of WGC's Indian operations.

Two-thirds of India's gold demand comes from rural areas, where jewellery is a traditional store of wealth.

But this year's monsoon has so far delivered less-than-average rainfall, delaying sowing in many parts of the country and raising concerns the success of summer-sown crops.

Indian gold futures hit a record high of Rs 35,409 ($511.54) per 10 grams in July. Local prices have risen 10 percent so far in 2019.

However, demand would recover in the final quarter, Somasundaram said. In a report published on Thursday, the WGC forecast India's gold consumption in 2019 at 750 to 850 tonnes, from 760.4 tonnes last year and a 10-year average of 838 tonnes.

"People will get used to these kinds of prices and normal buying will resume," he said.

Demand usually rises in the October-December quarter due to the wedding season and festivals such as Diwali, when buying bullion is considered auspicious.

Meanwhile, scrap gold supplies in India could increase 15 percent in 2019 to around 100 tonnes as the rally in local gold prices prompts consumers to sell old trinkets and jewellery, he said

In the first week of July, India raised the import duty on gold to 12.5 percent from 10 percent as policymakers try to bring down the fiscal deficit and recapitalise banks.

The duty hike could lift gold smuggling in 2019 above last year's around 95 tonnes, Somasundaram said.

India's gold consumption in the June quarter rose 13 percent to 213.2 tonnes on higher jewellery and investment demand, helping India surpass China as the biggest consumer of the metal in the world for the first time since the December quarter of 2013, the WGC said in its report.