Spot gold jumped more than 4 per cent last Friday on rising expectations the U.S. Federal Reserve could be forced to launch more monetary stimulus after data showed a surprisingly weak jobs market.
Prices have since been steady above $1,600, with investors eyeing a European Central Bank policy meeting later on Wednesday and a speech by Fed Chairman Ben Bernanke on Thursday.
Gloomy equity markets and high interest rates have forced investors in India to cash out of gold, said Prithviraj Kothari, president of the Bombay Bullion Association.
"There is no money available and people are selling their old gold," Kothari said, adding that India could see scrap sales rise to 400 tonnes this year, more than triple last year's 130 tonnes.
The rupee tumbled to a record low against the dollar last week, but has since pared some of those losses. The weak rupee has kept local gold prices at lofty levels and dampened buying demand in India, traditionally the world's top gold consumer.
"I last sold gold about a year ago and I am back again as prices are high," said a woman selling 100 grams of 20-year-old jewellery worth 300,000 rupees to a scrap dealer in Mumbai's famed Zaveri Bazaar, who declined to be named.
Gold bar premiums in Hong Kong were steady around $1.10 to $1.60 an ounce above London prices. In Singapore, premiums were unchanged from a week earlier at $1, dealers said.
"Last night, there was some selling from Thailand and other countries in Southeast Asia, and demand from Chinese banks was mediocre," said a Singapore-based dealer.
Data showed Hong Kong shipped more than 101 tonnes of gold to mainland China in April, up 62 percent from the previous month. Gold imports into the territory from China rose to an unprecedented 34 tonnes, surprising many market participants.
Some said people could be taking advantage of the difference between onshore and offshore interest rates by shipping gold back and forth for financing purposes.
In Tokyo, fresh selling eased the tight supplies that had pushed local gold bar premiums to a 14-month high in late May, dealers said.
"Supply is still tight but has improved as higher prices have lured back some selling," said a Tokyo-based dealer, though he added that the strong yen was capping selling interest.
After this week's ECB rate decision and Bernanke testimony, investors will closely watch the Greek elections on June 17 and a Group of 20 meeting on June 18-19 for clues on the state of the euro zone crisis and potential solutions.
Gold demand in India is likely to remain subdued in the coming months due to the onset of monsoon rains.
Copyright @Thomson Reuters 2012