Gold importers in India, the world's largest consumer, are expected to stay out of the markets on Thursday in anticipation of volatile prices with the start of US-led military assault on Iraq, traders said.
"I think traders will wait and watch the price movement," said Nayan Pansare from trading firm Inter Gold Ltd.
The local market opens at 11:30 a.m.
He said people were looking at a price of about $325 an ounce, a level which could trigger heavy imports. Spot gold was quoted at $334.00-335.00 an ounce at 0450 GMT, up from $332.00-333.00 in the middle of Asian morning trade, after explosions rocked Baghdad and US President George W Bush said the early stages of an attack on Iraq had begun.
The metal closed at $335.50-336.26
India imports an average of 1.5 tonnes of gold every day to meet annual demand of more than 800 tonnes.
"Traders think the prices may fall in the next few days as had happened during the last Gulf War," said Suresh Hundia, president of Bombay Bullion Association.
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.
"Prices have to come down. It's now a matter of time," said a bullion dealer with a global bank.
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