A poor monsoon has weakened the demand for gold in India and the jewellers are offering higher discounts to beat the slowdown in the world's second largest consumer market of yellow metal.
The overall monsoon rainfall is expected to be below the weather agency's forecast of 88% of the long-term average.
A second consecutive year of below normal rainfall is expected to hit the agricultural sector hard, bringing the farm output significantly down. Rural consumers account for two-thirds of the gold demand in the country.
"There are concerns over demand from rural areas due to poor rainfall," Mumbai Jewellers Association vice-president Kumar Jain told Reuters.
"Even in urban areas demand is modest. Many customers are waiting for prices to come down to July levels," Jain said.
In early August, gold prices fell to five-and-a-half-year low of Rs 24,577 per 10 gm, as the US dollar strengthened on the expectations of an interest rate hike by the US central bank in September.
But the recent turmoil in the global markets has pushed gold prices up again. The prices of yellow metal have recovered by nearly 8% from the lows hit in August, as jewellers stepped up buying at lower levels.
"Anticipating higher demand at lower levels, everyone imported aggressively last month. But demand wasn't that strong," said a Mumbai-based bank dealer.
"Now they are struggling to clear stocks," the dealer said.
Even in other Asian markets, the demand for the precious metal remains subdued. In Tokyo, the dealers have been offering a discount of nearly about 50 cents for the past three weeks.
"In our retail store, we are not seeing significant buying interest. Some customers are selling gold back to us," said a Japanese trader.