MUMBAI/BENGALURU (Reuters) - Demand for gold in Asia edged up this week as prices hovered near their lowest since early June, while discounts in India narrowed the most in 8-1/2 months as a fall in prices prompted buying during the festive season.
Gold is on track for its second straight weekly loss, down nearly 5 percent.
Gold prices could pull back to as low as $1,200 an ounce after breaking out of their 2016 uptrend this week, according to analysts who study past price patterns to determine future direction.
"Individuals as well as business were picking up physical gold, as they see this pullback as an opportunity," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.
"There were lot of shorts triggered and people were shopping in the market because of the fall below key psychological 1,300 level."
Dealers were offering discounts of $4 an ounce over official domestic prices this week, the lowest since the week ended Jan. 23. Last week, the discounts were at $10.
"In the last few days we have seen good retail demand. For consumers 30,000 rupees (per 10 grams) is a psychological level. They are buying since prices have fallen below this level," said Harshad Ajmera, proprietor, JJ Gold House, a wholesaler in the eastern India city of Kolkata.
Earlier in the day, gold prices in India touched 29,657 rupees per 10 grams. It had dropped to 29,550 rupees in the previous session, the lowest level since June 8.
Demand for gold usually strengthens in the last quarter as India, the world's second-biggest consumer, gears up for the wedding season as well as festivals such as Diwali and Dussehra, when buying the precious metal is considered auspicious.
Due to the narrowing discounts, it has been becoming viable for banks and refiners to do business, said a Mumbai-based bullion dealer with a private bank.
The country's gold imports in September fell 43 percent from a year ago to 30 tonnes, provisional data from consultancy GFMS showed.
Top-consumer China is closed for the week-long National Day holidays, and traders foresee a good demand once they resume trading on Monday, given the lower prices.
Singapore saw a big pick-up in gold demand of about 30 to 40 percent, traders said, adding that prices were at a premium of 50-60 cents.
Premiums in Hong Kong were quoted around 60 cents to $1 an ounce, while prices in Tokyo were at a premium of 25 cents.
Reporting by Rajendra Jadhav in Mumbai and Swati Verma in Bengaluru; Editing by Sherry Jacob-Phillips