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MUMBAI/BENGALURU (Reuters) - Gold demand in Asia rose this week, helped by a correction in prices, but traders said some buyers have held back from purchases while they wait for bullion prices to drop further.
Analysts said gold buyers were expecting prices to dip in the upcoming days, banking on the possibility of the U.S. Federal Reserve hiking interest rates in June. Higher rates increase the opportunity cost of holding non-yielding bullion. Futures traders are pricing in a 74 percent chance of a June hike.
Gold prices in India have been at a premium over the last couple of weeks due to stronger demand for the annual Hindu and Jain holy festival of Akshaya Tritiya and the recent dip in global rates have further boosted the appetite.
"The price correction is attracting retail buyers. Jewellery demand is good for wedding season. At this price level even investment demand is emerging," said Mukesh Kothari, director at bullion dealer RiddiSiddhi Bullions in Mumbai.
In the local market, gold futures were trading around 28,238 rupees per 10 grams on Friday, down more than 2 percent compared to last week.
The benchmark spot gold price is poised to end the week down about 3 percent, the biggest percentage fall since the week ending Nov. 11.
Dealers in India were charging a premium of up to $2 an ounce this week over official domestic prices, compared to a premium of $1.50 last week. The domestic price includes a 10 percent import tax.
In the first quarter of 2017, Indian demand rose 15 percent from a year ago, the World Gold Council said in a report earlier this week.
In top consumer China, premiums rose to $12 an ounce over the international benchmark, from $8 to $10 last week. In Singapore, gold premiums were between a 70 cents to $1 range, compared with a 50 cents to 80 cents premium last week.
"Although there was some pick up (in demand) as gold price fell, customers are looking for more even lower prices... People are waiting for prices to fall to $1,200," a Singapore-based physical dealer said.
In Japan, however, demand this week remained limited due to national holidays with gold being sold at a discount of 25 cents.
Writing by Koustav Samanta in Bengaluru; Editing by Christian Schmollinger