Gold premiums in India, the second-biggest buyer of the metal after China, fell more than 30 percent on Friday from earlier this week on speculation about easing of restrictions on bullion imports.
Premiums were quoted at $75-$85 an ounce on London prices on Friday, compared with $110 on Wednesday. Premiums hit a record high of $160 last month.
Ruling Congress party chief Sonia Gandhi has asked the government to review tough import restrictions on gold, which include a record 10 percent import duty, local media reported on Thursday.
India used to be the world's biggest buyer of bullion until the government and central bank stepped in last year with import curbs aimed at reducing a record current-account deficit.
"There is panic in the market on rumours of easing restrictions, so premiums are down. If there is an announcement by any chance, there will be a greater fall in premiums," said Harshad Ajmera, director of the All India Gems and Jewellery Trade Federation.
However, Indian Finance Minister P. Chidambaram ruled out any change in restrictions, saying that there will be no roll backs until "we have a firm grip on the current account deficit".
"We will have to wait and see, (but) nothing is going to happen in a hurry. If anything happens, it will only be in mid-February," said a dealer with a private bullion-importing bank.
India's budget is due to be presented in February.
Premiums across the rest of Asia remained stable, with the Chinese still buying ahead of the Lunar New Year holiday next week.
In China, which celebrates the holiday starting on January 31, consumers are buying jewellery, bars and coins for good fortune and for gift-giving.
Premiums for 99.99 percent purity gold on the Shanghai Gold Exchange, a physical trading platform, ranged around $10 to $14 an ounce for the week, lower than the $20 seen earlier this month.
Weekly trading volumes as of 0845 GMT were the highest since June, at about 88 tonnes.