Premiums in India, the world's second-biggest gold buyer, fell on Friday to $5-$6 an ounce on London prices, against $10 quoted last week, traders said. Premiums struck a record $160 an ounce in December last year.
"There's carry forward stock from June, and because of low demand, supply is available," said Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation.
Demand is generally low during the monsoon period. Festivals will re-start in September and continue till November.
India is estimated to have imported 100 tonnes of gold in June, about twice the normal average after private agencies were allowed to import the metal. Imports may be about 40-50 tonnes in July and August, Bamalwa said.
However, traders will have to live with a record 10 percent import duty, as the government does not have a proposal to end it currently under consideration, the country's junior finance minister has said.
India, desperate to trim a gaping current account deficit, took several measures last year to curb demand for bullion, its second-biggest import after oil.
Besides the duty imposed by the finance ministry, the Reserve Bank of India also imposed the so-called 80-20 rule that requires a fifth of all bullion imports to be re-exported.
REST OF ASIA
Buying interest for physical gold picked up slightly in Asia this week as prices dipped below $1,300 an ounce.
"We saw some interest once prices fell below $1,300," said one dealer with a bullion bank in Singapore.
"However, the volumes were not big as buyers believe there are more declines to come. There are no issues with supply right now as demand is quiet, so premiums have been very stable," the dealer said.
Premiums to the global benchmark were steady at around $1 in Hong Kong and Singapore. Tokyo prices swung to a small premium from a discount earlier this month.
In top buyer China, prices were at a premium of about $3, up from flat rates last week.