Mumbai/Bengaluru: Gold demand in Asia tapered off this week as buyers took to the sidelines in India to await a new national tax policy and as China entered a seasonal slowdown.


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Spot gold, trading on Friday at just below $1,270 an ounce, has gained 4 percent since hitting an eight-week low of $1,213.81 on May 9.


Prior to the rise in spot prices due to the uncertain political situation in the United States, bullion buyers in India had been building stocks ahead of a national sales tax that takes effect on July 1.


This week, though, gold demand in India slumped as jewellers became more cautious.


"Retail demand is weak ... Jewellers are now waiting for a clear price trend and the new tax system," said Harshad Ajmera, president of the Indian Association of Hallmarking Centres.


The new goods and services tax (GST) will replace a slew of federal and state levies from July 1, but the government has yet to fix a tax rate for gold under the GST. The government is likely to finalise the tax rate for gold on June 3.


Anticipating higher tax rates, many jewellers have been buying gold the last few months, and this could mean India`s imports are set to plunge during the usual period of peak demand in the second half of the year.


Dealers in India were charging a premium of up to $1 an ounce this week over official domestic prices, unchanged from last week. The domestic price includes a 10 percent import tax.


"From the next week, gold could start trading in discount. In the last few months, banks have imported much more gold than demand," said a Mumbai-based bank dealer with a private bank.


In China, the world`s top consumer of gold, demand for the yellow metal has weakened as May-June is usually a quiet period for jewellers. But traders said they expect festive buying will boost demand in August and September.


"There is not too much demand with prices hovering between $1,250-$1,260," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.


Premiums in China were seen at $7 an ounce, down from $10 last week, traders said.


In Hong Kong, premiums were priced in at 60 cents to $1 an ounce, unchanged from the week before.


Prices in Tokyo were quoted at a discount of 50 cents, also unchanged from last week. Premiums in Singapore were almost unchanged at $1 as against $1-$1.20 the previous week.