Gold importers in India, the world's biggest buyer of the metal, struggled to clear their old stock even at a discount to market price while consumers digested a 50 percent hike in import tax.
Sales have been declining in a wedding season, which will continue till May, while festivals are also scheduled during this period. However, over the longer term, industry officials say gold demand is unlikely to waiver.
"Traders had stocked before the tax in anticipation of demand, but now the market has slowed," said Lokesh Kumar Agarwal, chairman of Lucknow-based wholesaler Brijwasi Bullion and Jewellers, adding people are offering discounts of 100 rupees.
Gold for February delivery on the Multi Commodity Exchange (MCX) was 0.28 percent lower at 30,606 rupees per 10 grams by 2:50 p.m., in line with global markets.
The yellow metal had touched a high of 30,847 rupees on January 21, when the federal government raised import tax to 6 percent from 4 percent.
Global gold inched down, pulling further away from a one-month high hit earlier in the week, as increasing confidence in the global economic recovery dulls bullion's appeal as a safe-haven investment.
A weaker rupee kept the downside in prices limited. The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal.
Silver for March delivery on the MCX was 0.76 percent lower at 59,410 rupees per kg.