Festival season is kicking off in India – a period in which gold sales traditionally spike in the world's largest consumer market for the precious metal.
This year investors are watching the key market particularly closely, following a period of muted demand when bourses have rallied and supply has been choked.
The recently elected government of Prime Minister Narendra Modi surprised industry analysts by keeping import controls unchanged in its July maiden budget, in spite of an improvement in India's trade balance.
At the same time, gold demand has become subdued in India, as domestic investors favor equity markets, which have risen 25 per cent in the past six months on hopes of renewed economic growth following Mr Modi's victory in May.
"We have been saying for about a year now that gold is not what it used to be," says Swapnil Pawar, business head at Karvy Capital, the asset management and investment advisory group.
Last year duties on the precious metal were raised to 10 per cent,and an "80-20" rule was introduced. The scheme allows agencies to import gold on the condition that one-fifth of the shipment is re-exported, helping balance India's trade bill.
The moves followed a period of heavy buying as global gold prices dropped in early 2013, boosting imports and contributing to a broader currency crisis that hit India.
The latest data from the World Gold Council, a trade body, show gold investment demand was down 62 per cent year-on-year to just 94.3 tons in the first half of 2014, while jewelry demand dipped 14 per cent year-on-year to 300 tons.
Premiums – the added price traders in India are willing to pay above the global price once duties are paid – have dropped from highs of over$150 per ounce to $30 per ounce, according to Kishore Narne, commodities analyst at Motilal Oswal, a Mumbai-based brokerage.