Gold demand turned fragile this week in India as local prices jumped to their highest level in 2-1/2-years, while traders in major buying centres in Asia pinned hopes on purchases ahead of the approaching Lunar New Year.
Local gold prices in India, world's second-largest gold consumer, touched their highest since July 2016 this week.
"Prices are just moving higher and higher. Buyers are waiting for a correction in prices and the annual budget as there is speculation of a duty cut," said a Mumbai-based dealer with a bullion importing bank.
Prime Minister Narendra Modi's government will present the budget on Feb. 1.
The bullion industry has been urging a tax reduction to combat smuggling, which has increased since India raised the import duty to 10 per cent in August 2013, to narrow its current account deficit.
The industry speculates about the duty cut every year before the budget but the government hasn't made any change in the tax structure in the last six years, the dealer quoted earlier said.
Dealers in India were offering a discount of up to $7 an ounce over official domestic prices this week, up from last week's discount of $6. The domestic price includes a 10 per cent import tax.