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Physical gold demand picked up in India this week as domestic prices fell ahead of key festivals, while premiums in China climbed further as its currency weakened.

Dealers in India charged premiums of up to $3 an ounce over official domestic prices, inclusive of 15% import and 3% sales levies, up from last week's $1 premium.

Gold prices in India fell to 48,965 rupees per 10 grams on Friday, the lowest since Feb. 11, attracting buyers and allowing dealers to raise premiums.

Jewellers were making decent purchases for the upcoming festive season because of price correction, said Harshad Ajmera, proprietor of JJ Gold House, a wholesaler in Kolkata.

"Demand would improve sharply if prices stay around this level for a few weeks."

Supplies are limited as imports fell last month, but they will jump in September, said a Mumbai-based dealer with a global trading firm.

In top consumer China, premiums climbed to $20-$25 an ounce over international benchmark spot prices in thin trading with some regions facing COVID curbs, compared with $16-$25 last week.

"Don't expect a convergence until China finds resolution with the West and change of course on zero COVID policy," said Bernard Sin, regional director for Greater China at MKS PAMP.

"Despite the PBOC's aggressive measure to curb the RMB depreciation, the SGE (Shanghai Gold Exchange) gold continues to trade at around $25 premium in light volume," he added.

The People's Bank of China (PBOC) which recently cut the foreign exchange reserves ratio to slow the yuan's depreciation, controls how much gold enters the country via quotas to commercial banks.

"China's demand exceeds what's produced in the country. Rising premium indicates improving demand, which aims to attract more gold from abroad," said UBS analyst Giovanni Staunovo.

In Hong Kong, gold was sold at $0.5-$2 premiums.

Singapore gold premiums were steady at $1.80-$2.30. In Japan, gold changed hands at $0.50 discounts to $0.50 premiums.