Record gold prices have scared buyers in many parts of the world and left them to watch helplessly the blistering rally that shows no signs of abating.
But sales of gold have surged as consumers take advantage of the high price, which has doubled in just two years.
Spot gold hit a lifetime high of $936.50 an ounce on Friday.
Traders say gold demand in India, the world's top bullion consumer, has been sluggish, Japanese retail buyers have turned into heavy sellers, jewellery demand in South America has slumped and Chinese retailers have cut stocks.
Physical traders in Germany report slow buying, while Switzerland has witnessed heavy inflows of gold scrap for refining. Holders in Indonesia and Hong Kong have been selling scrap gold.
It's absolutely quiet on the gold and silver side, here as well as in Asia, said Wolfgang Wrzesniok-Rossbach, head of marketing and sales of precious metals at Germany's Heraeus.
Analysts in India said the marriage season -- which generally boosts buying as parents prefer to give gold to brides for financial security -- has failed to lift purchases as buyers are not comfortable with heightened price volatility.
Some industry estimates suggest Indian gold imports might slip by 25 percent from 2007 to around 600 tonnes this year. The country imports about two-thirds of its annual gold demand, while the gap is met by recycling of the metal and local output.
The price is too high. They (Indians) won't buy gold, said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
N. Prasad, bullion analyst at Safetrade Advisors in India, said physical demand in the country was sluggish because of high prices and it would take time for buyers to adjust.
The marriage season is going on in India, so they can only postpone buying, but not cancel. Demand in the first quarter should not be as high as in the same period last year, as when prices rise, people reduce their budgets, he said.
The picture in the rest of the world was also not bright.
I believe that in large part, the jewellery demand in North America is certainly slumpy, said Jon Nadler, senior analyst at Kitco Bullion Dealers in Montreal.
We've had quite a few calls from manufacturers and designers of jewellery wondering what's going on because they really can't sustain (business) at these levels. They saw some of the worst Christmas sales in many years in the jewellery sector.
Metals consultancy GFMS Ltd. saw gold fabrication demand slipping by 20 percent in the first half of 2008. Total demand rose 12.3 percent to 3,278 tonnes in 2007 from a year earlier.
SCRAP SALES SURGE
Gold's rally has sent jitters across Asia, with jewelers complaining high prices are turning consumers away.
But for some, gold is a hot commodity.
Investment demand for gold has increased tremendously. I can feel it from what the men on the street are saying. Even people say on TV that gold is a number one investment tool, said a precious metals dealer in Singapore.
But Japanese investors have been heavily offloading.
High gold prices will keep Japanese retail investors as sellers this year, while their aggressive purchases will be limited, said Shuji Sugata, manager at Mitsubishi Corp. Futures and Securities Ltd. in Tokyo.
Industry experts noted a slightly different pattern in China, the world's second-largest gold consumer.
In China, you can't return scrap for cash, but you can trade in old jewellery for new jewellery, said Roland Wang, managing director (Greater China) for the World Gold Council.
So it's basically a way to buy new jewellery without having to spend as much money, rather than a way to generate cash.
China accounts for about 10 percent of global gold demand of more than 3,000 tonnes for fabrication purposes, which includes gold jewellery, bars and coins.
We have been seeing a very good level and good flow of scrap on a global basis. The higher prices are encouraging the scarp to flow out of the woodwork, said Andy Montano, director with bullion dealer ScotiaMocatta in Toronto.
(Additional reporting by Lucy Hornby in Beijing, Frank Tang in New York, Lewa Pardomuan in Singapore, Chikafuni Hodo in Tokyo, and Biman Mukherji in New Delhi)
(Editing by Chris Johnson)