China's gold purchases slowed down ahead of the Lunar New Year holiday, while India's bullion traders stayed away from placing fresh orders after a nearly 90% hike in gold import duty was announced earlier this week.
India's government raised the import duty on bullion to 2% on value from the previous flat rate of Rs 300 per 10 grams, and to 6% on value from Rs 1,500 per kilogram on silver.
"The activity is muted today as the initial reaction to the duty hike is not positive," said Pinakin Vyas, assistant vice president with gold-importing IndusInd Bank in Mumbai.
The most-active gold for February delivery on the Multi Commodity Exchange was trading almost steady at Rs 27,510 per 10 grams, or $1,682.3 an ounce.
Though in the short term traders and consumers may hesitate to buy into higher prices, the increased duty is unlikely to have significant impact on India's gold appetite in the longer term, traders and analysts said.
"Some time later people will digest the price rise, but the impact will stay for a week or two," said a Singapore-based dealer.
India last raised gold import duty in February 2010. Its gold consumption that year soared 66%, data from the World Gold Council showed.
Supporting the sentiment, the Indian rupee hit a two-month high against the dollar, which helps boost purchasing power of Indian gold buyers.
Premiums in Hong Kong and Singapore dropped a touch from a week earlier as bullion demand eased. In Hong Kong, gold bar premiums were quoted in the range of $1.50-$2 an ounce. Premiums in Singapore were about $1, down from as high as $1.30 last week.
"There is still a bit buying today, but starting tomorrow there will be little business," said Dick Poon, manager of precious metals in Heraeus in Hong Kong.
Dealers reported some scrap selling in the previous session, as upbeat data from China, Germany and the United States propelled spot gold to a one-month high just below $1,670 an ounce. Spot gold was trading at $1,646.99 an ounce by 0838 GMT.
But the selling faded quickly, as prices retreated to lower $1,640s earlier in the day and attracted light buying in the region, dealers said.
In Tokyo, gold bar discount widened to 50 cents an ounce from 25 cents last week, an official at a large bullion house said.
Week ahead
China, the world's second largest gold consumer, closes shop next week for a week-long holiday for the Lunar New Year.
Market participants will continue to watch the unfolding euro zone debt crisis, a major threat to the global economy. Other events that may affect gold prices include a policy meeting by the US Federal Reserve on January 24-25.
