Indian gold futures shed about 1 percent on Monday weighed by strength in the rupee, which reversed from its record low hit last week, but physical traders were unwilling to book deals awaiting further price falls.
At 01:46 p.m., the most-traded gold for August delivery on the Multi Commodity Exchange (MCX) was 0.56 percent lower at 29,806 rupees per 10 grams, after dipping to as low as 29,720 rupees earlier.
The rupee rallied on Monday on hopes for government measures to halt a slump in the currency. The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal.
"There is no demand at current levels. Who will buy at near record (high) levels?," said a dealer with a private bank in Mumbai.
Price stability at 28,000 rupees, about 6 percent lower than the current price, could bring back buyers, the dealer added.
Demand could also remain sluggish in the coming months as the onset of the rains curtail festive and wedding activity. Traders were also tracking the progress of monsoon rains to forecast upcoming wedding and festival demand.
"...with seasonal buying not due for another two months or so, there really isn't much incentive to jump in at these levels," said UBS in a note to its clients.
Monsoon rains are still expected to be average in 2012, allaying concerns over farm output triggered by sparse rainfall in the last few weeks.
Rural areas, which contribute to over 60 percent of gold demand, are dependent on monsoon rains to spur agricultural production and disposable incomes.
Silver also fell in tandem with gold.
Silver for July delivery on the MCX was 0.99 percent lower at 52,430 rupees per kg.