India gold buying recedes; slack supply pumps up premium

India gold buying retreated on Wednesday afternoon, as prices extended gains for a fourth session supported by a weaker dollar, though limited supplies pressured premiums upwards, dealers said.

"There are a few deals, I booked about 25 kgs from morning at USD 1,374 (an ounce)," said a dealer with a state-run bullion importing bank in Mumbai. The most-active gold for February delivery on the Multi Commodity Exchange was trading 0.20% higher at Rs 20,374 per 10 grams at 1:12 pm, after hitting a high of Rs 20,383, adding to the 0.5% gains of the previous three sessions. Premiums continued to edge higher driven by lack of supplies, dealers said. "The increase in premiums is all supply driven, even though demand is limited," said Pinakin Vyas, assistant vice-president with IndusInd Bank. The winter harvesting season is underway in India and is expected to leave more disposable income with rural households, which contribute significantly to gold demand. The wedding season starts in February. In India, which accounts for 20% of global demand for jewellery, gold is widely gifted in religious celebrations and weddings.