Asian buyers rushed to the market in early January to take advantage of gold prices which were below $1,630 an ounce, their lowest in more than four months.
Prices, however, have since risen to almost $1,700 an ounce, discouraging buyers who usually stock up on gold ahead of the Lunar New Year holidays in mid-February.
Most Indian buyers stocked up on gold in the first week of January, after the finance minister hinted that a duty hike is on the cards.
Last week, India raised import taxes on gold to 6 percent from 4 percent in a bid to curb imports to help rein in a record current account deficit, but industry experts said long-term gold demand is unlikely to waiver.
"We had comfortable sales in the last two months, but after the duty hike no one is interested," said Harshad Ajmera, proprietor of JJ Gold House, a wholesaler in Kolkata.
"Over the longer term, unofficial channels will replace official import channels as gold is required from birth till death in Indian tradition," he added. India is the world's biggest gold importer.
The benchmark gold futures contract on the Multi Commodity Exchange (MCX) traded at 30,792 rupees per 10 grams, up from a one-month low of 30,758 rupees hit last week.
CHINA DEMAND EASES, SOME INDONESIA BUYING
Higher prices also slowed down China's gold buying two-and-a-half weeks before the Lunar New Year holiday during which gifts of gold jewellery, bars and coins are popular. Some traders said buyers had already stocked up enough in January.
"I wouldn't say demand from China is really good in comparison to the same time in the last few years," said a Hong Kong-based trader.
Spot gold stood at $1,691.29 an ounce by 0907 GMT, close to a one-month high of $1,695.76 hit in the previous session. The higher prices have teased out some scrap selling, dealers said.
A firmer rupiah has triggered some buying from Indonesia, a Singapore-based dealer said, while there was some buying and selling from Thailand.
"If the rupiah keeps strengthening, we should be able to see physical demand continue from Indonesia," she said.
Gold premiums in Singapore stood at $1.10 to $1.20 an ounce, little changed from last week, dealers said.
In Tokyo, selling in the physical market slowed after the yen strengthened against the dollar and lowered gold prices in the Japanese currency.
Investors will closely watch the Federal Reserve's policy meeting next week to gauge the central bank's attitude towards its bond purchase programme.
Any hint that the Fed was considering withdrawing such measures would deal a heavy blow to gold, which has attracted investors who were worried about currency debasement as a result of aggressive monetary easing.
Copyright Thomson Reuters 2013