According to a leading analyst, the demand for gold in India will be strong in eh month of October due to festivities in the country even as the customers are affected with high inflation.

Edel Tully, strategist of UBS, the biggest supplier of gold to India said that the demand from India for gold will remain strong despite higher gold prices due to festival period as well as interest rate changes.

The gold prices have already risen more than 20 per cent this year and are expected to rise further as market uncertainties are propelling investors towards safer investment options such as gold. The gold prices in India have risen by a substantial 29 per cent since the start of the year compared to 15 per cent last year.

The demand for gold in India is expected to peak during when the festivals of Dhanteras and Diwali at the end of October. Demand for gold bars, coins and other pure investment in the country have increased 83 percent in 2010 from the year earlier to 349 tonnes.

The demand for Gold in India, which is the world's largest bullion buyer, has remained strong despite a high level of inflation.