SINGAPORE/MUMBAI Physical buyers shied away from the gold market as prices hovered above $1,600 an ounce, waiting for the boost from the Cyprus crisis to fade and pull prices lower.
Demand from India, the world's biggest gold consumer, languished before next week's Holi festival, a period considered inauspicious for gold purchases, coinciding with the end of the financial year when traders prefer to keep low inventories.
Elsewhere in Asia, the buying spree seen in late February and early March, when prices fell to and held near seven-month lows, dried up, while prices were not high enough to tease out scrap selling, dealers said.
"We are back to the norm of slow demand after the Lunar New Year," said Dick Poon, general manager of Heraeus Metals Hong Kong, but added that a price dip below $1,600 an ounce would encourage buying.
Spot gold inched up $1.52 to $1,607.5 an ounce by 0859 GMT, up 1 percent so far this week following two weeks of mild gains.
Gold bar premiums in Hong Kong edged lower to $1.20-$1.50 an ounce above spot prices. In Singapore, the premium was steady at about $1.20, dealers said.
"A lot of metal has arrived in China and gold prices are higher, so we don't see much of a bottleneck," said a Hong Kong-based trader, referring to a supply crunch in late February in mainland China.
The premiums in gold contracts traded on the Shanghai Gold Exchange over spot prices have narrowed to single-digit numbers, suggesting lower demand for imported material.
GRAPHIC: Gold prices in different currencies
GRAPHIC: SGE vs spot gold
In India, benchmark gold on the Multi Commodity Exchange traded at 29,625 rupees per 10 grams, near a three-week high of 29,889 rupees hit earlier this week.
Traders expected April's gold demand to improve as the wedding season resumes, which will last till early June.
"There will be sales in marriage season next month, they'll prefer buying light weight jewellery rather than bulky ones," said Harshad Ajmera, proprietor of JJ Gold House in the eastern city of Kolkata, adding he expected April's gold imports to rise 20-25 percent from March.
Market participants will watch what Cyprus will do to avert a default, after it rejected terms for a bailout proposed by euro zone finance ministers, though analysts said Cyprus is unlikely to cause a major disruption in the global economy.
But the uncertainty and worries about the risk of contagion could keep gold prices supported, and physical gold buying depressed.
(Editing by Muralikumar Anantharaman)
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