(REUTERS) -- Gold demand in India marginally improved on Thursday after prices fell to their lowest level in more than two months, but many buyers in the world's biggest importer were on the sidelines hoping for a steeper fall soon, dealers said.

At 4:21 p.m., the most-active February gold contract on the Multi Commodity Exchange was 1.6 percent down at 26,844 rupees per 10 grams, after falling to 26,822 rupees earlier in the day, the lowest level for the first month contract since Oct. 25.

Compared to yesterday there is an improvement in demand, but it is lower than usual, said a Mumbai-based dealer with a private bank dealing in bullion.

Demand was weak for the past few days due to year-end holidays and ongoing Khar Mass. Khar Mass is a month in the Hindu calendar from Dec. 16 to Jan. 14 which is considered inauspicious for gold buying and starting new ventures.

People think prices will fall further. They are waiting for prices to stabilize before making large purchases, said Sheel Chand Jain, president of All-India Sarafa (Bullion) Association.

International spot gold fell to a three-month low on Thursday as prices were weighed down by a firm dollar.

The rupee, which plays an important role in determining the landed cost of dollar-quoted gold, fell to 53.43 to the dollar from 53.07/08 at Wednesday's close

A Reuters poll earlier this month of 20 hedge fund managers, economists and traders showed international spot gold prices are expected to fall below $1,500 an ounce over the next three months and they are unlikely to retest September's all-time highs until later 2012 at the earliest.