Gold premiums in India, the world's second biggest buyer after China, fell to their lowest in four months after the Reserve Bank of India (RBI) allowed private companies to import gold.
Premiums fell to $25-30 an ounce on London prices, a level last seen in February, from $60 charged earlier in June. Premiums hit a record of $160 an ounce in December last year.
India imposed curbs on bullion imports last year, including a record 10 percent duty on overseas purchases in a bid to control its ballooning current account deficit.
The government also introduced the so-called 80-20 rule that required a fifth of all imports to be exported.
The restrictions are likely to be eased by the new government led by Narendra Modi, industry officials had said in May. Modi has said any action on gold should take into account the interests of the public and traders, not just economics and policy.
The central bank eased some restrictions on gold imports earlier this month allowing "star trading houses", private jewellery exporters which had been barred from importing gold since July 2013, to resume imports.
"Premiums have gradually come down because of there is no scarcity of gold in the market, demand is not robust as the wedding season is coming to an end," said Bachhraj Bamalwa, director with All India Gems and Jewellery Trade Federation.
"We are expecting to relax imports curbs and reduce import duty by minimum of 4 percent in the coming budget," said Bamalwa.
The budget session of the parliament will start from July 4. The wedding season, which started in April, will near an end in June. Seasonal demand slackness will continue till August due to monsoon.
"Everyone is expecting a duty, so no one is interested to hold gold now. We expect good demand in September and October due to better availability," said an official with a private importing bank in Mumbai, who declined to be named as he was not authorised to speak to the media.
On June 11, trade secretary Rajeev Kher had said that India needs to rationalise its gold import duty after imports for May fell to 35 tonnes, about half of its normal average before the new import rules kicked in.