Jewellers in India faced shortage of the yellow metal ahead of the key wedding season, keeping premiums supported at higher levels, despite meeting part of the demand through left over consignment stocks from banks.
On May 13, the Reserve Bank of India restricted gold imports by banks on a consignment basis, except to meet genuine demand from jewellery exporters.
"We have some left over consignment stocks ... So for the time being we are catering to jewellers," said an official with a foreign bank importing bullion.
The actively traded gold contract for June delivery on the Multi Commodity Exchange (MCX) was 1.28 per cent lower at Rs 25,505 per 10 grams at 2.34 p.m., after hitting a low of Rs 25,373, a level last seen on April 18.
"People have already purchased for Akshaya Tritiya and Gurupushyamrut (an auspicious occasion), and we don't have ready material. Even if it is ready stock, we need to pay additional premium of Rs 700-1,500 (per 10 grams)," said Haresh Soni, chairman of All India Gems & Jewellery Trade Federation, a trade body.
India, the world's biggest buyer of the metal, celebrated the second biggest gold buying festival after Dhanteras last week, and weddings will continue till June.
Silver also fell the most in more than two years.
Silver contract for July delivery on the MCX was 3.07 percent lower at Rs 41,320 per kilogram, after hitting a low of Rs 40,479, a level last seen in late January, 2011.