Gold traders in India, the world's biggest buyer of the metal, stayed on the sidelines on Tuesday, and premiums continued to get support from lower supplies due to restrictions by the RBI.
The RBI has banned banks, along with state-run and private trading agencies, from importing the yellow metal on consignment or on payment of margin basis, making it difficult for small jewellers to source supplies on cash payment. The government also hiked the import duty to 8 percent.
"There is no noticeable demand. People are just observing right now, but actual buying is very less. The reason is that everyone is saying gold rates will go down. If we compare with April and May, it (demand) is much lesser," Haresh Soni, chairman of All India Gems and Jewellery Trade Federation.
Soni said retail consumers were not buying the yellow metal as the market was sentimentally very weak, following the recent slump in prices and also due to seasonal slackness after the monsoon rains.
On the Multi Commodity Exchange, gold prices extended gains for a fourth day in a row, recovering from their lowest level in more than two years, following global leads, though a stronger rupee limited the upside in prices.
At 5:09 p.m., the actively traded gold for August delivery on the Multi Commodity Exchange (MCX) was at 26,124 rupees per 10 grams, after gaining 1.5 percent in the previous three sessions.
Silver for July delivery on the MCX was 0.65 percent higher at 40,327 rupees per kg.