Premiums were quoted at $62 an ounce, a level last seen in the second week of October last year, compared to $75 on Thursday. Premiums hit a record $160 last month.
The leader of India's ruling Congress party, Sonia Gandhi, has asked the government to review tough import restrictions on gold, which include a record 10 percent import duty, local media reported on Jan. 23.
India used to be the world's biggest buyer of bullion until the government and central bank stepped in last year with import curbs aimed at reducing a record current-account deficit.
"There is a rumour of an import duty cut. The market is expecting a cut of a minimum 2 or maximum 5 percent on Monday," said Harshad Ajmera, director of the All India Gems and Jewellery Trade Federation, which groups over 300,000 jewellers.
"No one wants to buy at a higher duty so people have reduced orders, preferring to wait until Monday," Ajmera said.
Finance ministry officials were not immediately available to comment. The government will present an interim budget on Monday, in which it is expected to announce a relaxation in gold import curbs.
"Falling premiums can discourage jewellery imports, thus cutting off a source of supply that was strong during December and January," said Sudheesh Nambiath, India analyst with Thomson Reuters GFMS.
However, market participants said the so-called 80/20 rule, which links exports to imports and has squeezed supplies in the local market, may be reviewed only after March, when the government has a clearer idea of the trade deficit.
India's trade deficit came in at $9.9 billion in January, in line with the six-month average of $10 billion. This compares with a roughly $19 billion average earlier this fiscal year.
"80/20 will remain the major stumbling block in supplies, so premiums are likely to stay at elevated levels until the 80/20 rule is removed," Nambiath said.
Taking into account a sharper-than-expected fall in "non-oil/non-gold" imports, Citi estimates the trade deficit will narrow to $144.9 billion this fiscal year from $194 billion last year.
Gold premiums in the rest of Asia were largely stable from a week ago.
Trading volumes in China, the world's biggest consumer, were strong in the early part of the week following the Lunar New Year holiday. However, the buying pace slowed, tracking gains in the spot price.