Gold prices which dipped to a 20-year low at $272.50 a troy ounce on May 19, is reflected in the same measure in domestic prices, but it would not lead to a spurt in buying, they said.

"Since gold has lost its sheen as in investment proposition a couple of years back, the chances of low prices leading to increased buying at the moment is unlikely," Chand Mehra, director Enchante Jewellery said.

Mehra said as Indians were no longer ignorant about price fluctuations in international market, they would wait for further fall before making any significant purchase.

With gold imports into the country now being routed through official channels, fluctuations in international markets were getting reflected in the same measure in domestic markets as well, he said.

Gold prices fell to $272.85 a troy ounce inLondon, its lowest since May 30, 1979, following Britain's plans to sell more than half its gold reserves of 715 tonnes of gold.

Following the announcement of Britain's treasury on May 7, that it would sell 415 tonnes of gold, prices have been steadily falling, traders said.

Standard gold and ornament prices in the Delhi bullion market fell to Rs 4,210 and Rs 4,060 per 10 gm from Rs 440 and Rs 4,200 per 10 gm a fortnight ago.

International bullion markets were also agog with reports of imminent sales of gold reserves by Switzerland and International Monetary Fund (IMF) to the tune of 1,300 tonnes and 300 tonnes of gold respectively.

Traders said with arrival of monsoon and the marriage season well past, the dip in prices would not lead to rise in either imports or jewellery purchases.

"I do not see the fall in prices having any major impact on purchases and since there are reports of further offloading of the metals by Switzerland and IMF purchase decisions could be delayed," a World Gold Council(WGC) official said.

All India Sarafa association president Sheel Chand Jain said though prices were expected to fall further he saw no immediate rise in buying.

Mehra said the current fashion was to buy more of diamond jewellery and the preference for gold jewellery was fast fading.

"The current preference is for sleek and elegant diamond jewellery which is costlier as the preference for gold is on the wane for the last two years," he said.

Asked whether the lower prices would lead to any substantial increase in the cash-rich rural areas, the WGC official said "the good foodgrain production should spur more buying in the rural areas."

However, the official said the price fluctuation involving $2-3 was too insignificant to take into account as a factor determining the consumption pattern in the country.

Mehra said the 24 per cent decline in India's gold imports during the first three months of 1999 was due to the shift in imports from official channels to unofficial channels.

"With the dutyhike on gold imports effected during the last quarter of 1998, there is a considerable increase in smuggling through Pakistan and Nepal and it has reflected in the WGC figures," he said.

Official gold imports into the country in the first three months of the calendar year, according to a WGC report, registered a drop of 74 tonnes to 127 tonnes in comparison to imports in the same period of last year.

The council, however, has forecast an increase in demand in the remaining period of the year on expectations of rise in agricultural incomes and that a substantial part of this demand would be met through informal imports from Dubai.

The increase in import duty from Rs 250 to Rs 400 per 10 grams has raised the premium over international prices from 6.8 per cent in December to around 10 per cent in March, encouraging smuggling of the yellow metals through Colombo, Pakistan, Singapore and Dubai into the Indian subcontinent.