Onset of festival season failed to give a boost to gold demand in India this week with almost all jewelers and gold dealers reporting below average sales across all bullion markets in India.

Global bullion market has been expecting a huge demand from India this week for the yellow metals as the country celebrates Raksha Bandhan on August 24, an occasion for Indians to buy gold. Moreover, delaers are expected to refurbish their stocks during this week in anticipation of increased sales during the festival season. However, it seems high prices have kept buyers away from markets.

Sales are below normal now but some jewellery exporters are there buying in the market. Gold touched a four-week high on Friday, extending gains from the previous day as investors bought the precious metal and shied away from riskier assets on concern about the health of the global economy.

International gold was trading at $1,215.70/1,216.60 an ounce on Friday, as against the previous close of $1,211.20/1,215.20 an ounce, after hitting a four-week high of $1,217.35, the loftiest level since July 15.

India's gold collections in exchange traded funds (ETF) rose more than 82% on year in July as investors plucked bargains in anticipation of higher prices going ahead.

Gold collections by the seven fund houses rose to 11.294 tonnes in July, when the yellow metal struck a low of 17,660 rupees per 10 grams on July 29.

Though gold collections under the ETFs are growing on year, they remain miniscule against India's imports of around 700 tonnes annually.

The festival season in India will start next week and continue till November (Diwali). Gold sales in India generally decline around 60 per cent during June 16-August 15, as retail consumers abstain from fresh purchases.

This time around, the high gold prices may keep a few buyers away from jewellery shops but they may go for diamonds also now as the stones have become more affordable for the Indian middle class.

Gold imports in India are estimated to have declined by 50 per cent to 30 tonnes during June-July, compared to approximately 60 tonnes in the comparable period last year.

Since the main gold consuming class, farmers, require fresh money to buy high-yielding seeds during the kharif season, scrap sales generally increase at this time of the year. As a result, scrap availability has almost doubled.

Experts estimate that India's gold demand will reach 1,000 tonnes within the next three years. And the anticipated Indian gold consumption of 1,000 tonnes will represent 42% of total new world supply.