Gold has fallen about $30 since May 7 when the British Treasury announced plans to sell more than half of Britain's gold reserves.

Prices are the lowest since May 1979.

Physical demand was strong in Southeast Asia because of recovering economies and comparatively peaceful elections in Indonesia, traders in Singapore said."We are seeing a huge demand. The elections in Indonesia seem pretty quiet and peaceful, so demand is good," one trader said.

Another trader said economic data from Malaysia, Singapore, Thailand and Japan pointing towards recovery could augur well for demand for gold.But while recovery may help buying a little, "the overhang of official sector selling is still there. That is the main problem," the trader said.The premium in Singapore was steady at 80 to 90 US cents over London prices.In Hong Kong the premium over London prices wassteady at 30 US cents, and demand showed some improvement.

"We are seeing a bit of demand but nothing to shout about," said a senior trader at an international bank.

Another trader said the price drop has helped but "overall it is not very encouraging when you consider gold has fallen nearly $30".

Spot gold was quoted at $259.90/260.40 an ounce compared with $287.95 a month ago before Britain's gold sales announcement.

Offtake could accelerate once buyers became convinced the price had hit bottom, the Hong Kong trader said.

Hong Kong's economy remained in a recession that was marked by unemployment of more than six per cent, which sapped consumers' buying power for luxury purchases like gold jewellery.

South Korean gold industry officials said low world prices and the strengthening won were likely to trigger demand for jewellery.

Kay Lee, Korea manager of the World Gold Council, said demand for 18K gold jewellery had climbed back to more than 80 per cent of Korea's pre-crisis level in early1998.

In India, the world's largest consumer of gold, imports fell and the world price slide had not yet filtered fully to retail shops.

Gold imports through the city of Ahmedabad -- the country's main bullion importing centre -- fell 28 percent in May from April to 18.611 tonnes due to a seasonal lull in demand.

While Indians will buy in a fallen market, retail prices have still not dropped significantly, a dealer in Mumbai said.