Gold prices slipped from its peak level and was poised to end 2013 below last year's closing price after the government increased customs duty to 10 per cent and imposed import restrictions to contain increasing demand for the precious metal.
As of December 21, the price of 10 grams of gold had fallen Rs 840, or 2.76 per cent, from last year's close, while silver had lost Rs 13,630, or 23.57 per cent, per kg.
The government took steps to curb imports of gold after concerns about the country's current account deficit (CAD). In the previous financial year, the CAD climbed to a record high of 4.8 per cent of GDP on the back of higher gold imports and slowing exports.
Import duty on gold was increased to 6 per cent in January. Two more hikes followed -- to 8 per cent in June and to 10 per cent in August.
The Reserve Bank of India, too, imposed restrictions on gold imports for banks, such as curbs on granting advances for the purchase of gold in any form, including primary gold, bullion, jewellery, coins, units of gold exchange traded funds and units of gold mutual funds.
Finance Minister P Chidambaram appealed to citizens to refrain from buying gold and help the government's efforts to trim the widening CAD as the depreciating Indian currency continued to cause worries.
The rupee hit an all-time low of 68.85 against US dollar on August 28, when gold touched its all-time intra-day peak at Rs 33,790 per 10 grams.
Since then, gold came under pressure as demand petered out at higher levels and on weakening global advices. The rupee has recovered and was quoted at 62.04 against the dollar at the close December 20.
The government's measures brought down gold prices although it remained out of reach for the common man.
Gold's fall was also partly due to reported moves by the central banks of bankrupt Cyprus and other troubled European nations to sell their reserves to meet bailout conditions.
Prices tumbled in the overseas market on liquidation by hedge funds on speculation and fears of an early end to the Federal Reserve's quantitative easing programme as US economic conditions improved.
In Europe, gold nosedived to below USD 1,200 per ounce in June, its lowest level since August 2010, as fears persisted that the US Federal Reserve would wind down its monetary stimulus. In London, spot gold fell to USD 1,180.71 an ounce.
Gold futures marked their