"Prices of gold have fallen in line with the strengthening rupiah as we can't talk about local prices without referring to the currency movements," said one trader in Jakarta.

"Demand from households has started to pick up again because of the falling prices... gold cannot be separated from the Indonesian culture," said the trader.

Gold was quoted at 72,000 rupiah per gram against 83,000 last week, said traders. The local industry uses the international price of $296 per ounce as the benchmark for determining local prices.

Early this month, gold hovered at 90,000 rupiah per gram.

Panic selling swept crisis-hit Indonesia from January to March when the rupiah was much weaker and local gold prices rose dramatically.

But the trend has stopped because many Indonesians have started to see gold as a good investment, due to the fact thatits prices are fluctuating just like the currency.

Gold traders said before the crisis, gold consumption stood at 130 tonnes a year or about 10 tonnes a month. The present consumption is between one and two tonnes a month, they said.

The 200 million population in Indonesia holds gold in the form of jewellery, ornaments or artefacts.

The official Antara news agency reported on Thursday that prices fell in many cities such as Palangkaraya and Banjarmasin on Borneo, Semarang in central Java and Jayapura in the remote Irian Jaya province on the western half of New Guinea island.

An official with PT Logam Mulia, which refines gold mined by PT Aneka Tambang and sells it the form of gold bars, said prices of 24 karat gold fell to 73,400 rupiah per gram from as high as 155,100 rupiah in June.

"Demand for gold bars has fallen because of there imposition of a 10-per cent value-added-tax while the currency movements have depressed prices," said the official.

He said people bought gold bars for investmentpurposes, adding that before the economic crisis the company sold at least 100 kg of gold per month.

The current demand stands at 50 kg per month, he said.

The rupiah hit an eight-month high of 6,975 to the dollar this week, and was quoted at 7,575/7,675 at 0530 gmt.

On Wednesday, Indonesia's chief economics minister Ginandjar Kartasasmita said the country's exports would be damaged if the rupiah broke the 5,000 level.

He said the ideal rate for the currency was between 7,000to 8,000.