Gold demand in India, the world's largest importer, has risen in the past few days and its buying is likely to intensify this week with a fall in prices after US troops raided Baghdad on Monday, traders said.
The country's gold demand, which increases during the wedding and festival seasons, is expected to remain firm until June.
"There is a hectic buying activity in the market," said Narendra Singh Rathore of Kiran Jewellers from Jaipur, a key importing centre. "People are comfortable with the current price level."
One New Delhi-based trader said: "Gold has lost its status as a safe-haven investment since the war began, and we expect the prices to remain stable around $300 (an ounce),"
Spot gold was trading at a four-month low of $320/320.75 an ounce at 0800 GMT on Monday, well below New York's last indicated $325.35/326.05 on Friday.
"But prices are unlikely to fall below $300
Some traders said they were waiting and watching the situation as prices could further fall to $300-$310 an ounce from now after the end of the war.
US tanks smashed into a presidential complex in central Baghdad on Monday, taking the war to oust Iraqi President Saddam Hussein to the very heart of the city.
"We have postponed buying because prices are going down. We will wait for the stability to return," a trader said.
Safe-haven gold has a history of price volatility in times of war. It gained $45 to $415 when Iraqi forces invaded Kuwait in August 1990, then fell $40 to $336 when allied forces began action to evict Iraq from the Gulf emirate in January, 1991.
India imports an average 1.5 tonne of gold every day to meet its annual domestic demand of more than 800 tonne.
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