MUMBAI/BENGALURU Demand for gold in India remained lacklustre this week as higher prices hampered consumer purchases, but discounts narrowed due to a correction in overseas rates. The safe-haven bullion has fallen over 1 percent this week despite a mixed bag of U.S. economic data ahead of next week's U.S. Federal Reserve policy meeting.
In India, the world's second-biggest gold consumer, discounts on official domestic prices came down this week to $20 an ounce, from last week's $32.
"Some customers are replacing old jewellery for new, but fresh demand is still weak," said Kumar Jain, vice-president, Mumbai Jewellers Association.
In the past few months, demand in India has remained sluggish due to higher prices and as droughts hit purchases in some rural areas.
India's gold imports in August plunged 77.5 percent from a year earlier to $1.12 billion.
Gold prices in India are trading around 30,865 rupees per 10 grams on Friday, after it fell 1.6 percent in the previous eight sessions.
"People are waiting for a correction. By this month-end, retail demand is likely to improve," Jain said.
Demand for gold is expected to strengthen in the final quarter as India gears up for the wedding season as well as festivals such as Diwali and Dussehra, when buying the precious metal is considered auspicious.
"Jewellers are slowly building inventory for festive season. Some jewellers are postponing purchases, hoping prices will fall below $1,300 (per ounce)," said a Mumbai-based bank dealer.
Buyers in China and Hong Kong stayed away from the market as a mid-Autumn Festival holiday shuttered trade on Thursday and Friday. In Singapore, premiums rose about 80 cents from 50-60 cents last week.
"With prices going down we hope that some demand will emerge. We have started seeing some queries and movement in the metal, but these are early days," a Singapore-based metals trader said. The Tokyo market, too, remained quiet as public interest was very limited this week, keeping the premium at zero, traders said.
(Reporting By Nallur Sethuraman in Bengaluru and Rajendra Jadhav in Mumbai; Editing by Sherry Jacob-Phillips)