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MUMBAI - India's gold demand could strengthen significantly in the fourth quarter, the World Gold Council (WGC) said on Thursday, with a drop in global prices and the release of pent-up demand expected to lift jewellery sales during the peak festive season.

Higher demand from the world's second-biggest gold consumer could help support spot prices after a near 5% correction so far this year, but a rise in imports of the metal would widen India's trade deficit and weigh on the rupee.

"The fourth quarter is likely to be one of the best quarters in recent years. Pent-up demand, softening of gold prices and weddings will drive the demand," Somasundaram PR, regional chief executive officer of WGC's Indian operations, told Reuters.

Demand for the precious metal usually spikes towards the end of the year in India, as buying gold for weddings and major festivals such as Diwali and Dussehra is considered auspicious.

Indians celebrated Dussehra earlier this month and anecdotal feedback from manufacturers indicated strong sales, he said.

The pick-up in retail demand gave confidence to manufacturers, and imports in the September quarter jumped 187% from a year ago to 255.6 tonnes, he said.

In a report published on Thursday, the WGC said gold demand jumped 47% in the third quarter from a year earlier to 139.1 tonnes as jewellery demand surged 58% to 96.2 tonnes.

Demand for coins and bars - known as investment demand - rose 27% in the same period to 42.9 tonnes as investors increased hedging amid a stock market rally, the WGC said.

Somasundaram did not provide a demand estimate for 2021, but said demand could be better than 2019's 690.4 tonnes and well above 2020's 446.6 tonnes.

"With restrictions being gradually lifted across the country, retail demand is bouncing back to pre-Covid levels. With the upcoming festive and wedding season, there is all the more enthusiasm towards gold demand," he said.

(Reporting by Rajendra Jadhav)