A stronger rupee boosted gold purchases from India just before the wedding season resumes in India, the world's largest gold consumer, while physical flow into China was lukewarm ahead of the Lunar New Year holiday.

The rupee held near a one-month high hit in the previous session, fuelling purchasing power of Indian bullion buyers who had moved to the sidelines as a weak rupee kept local prices at lofty levels.

Overall demand has been good since last week as prices are down due to a stronger rupee, said Harshad Ajmera, proprietor of JJ Gold House in Kolkata. All jewellers are comfortable at this rate.

The most-active gold futures contract on the Multi Commodity Exchange stood at 27,715 rupees per 10 grams, down nearly 6 percent from an all-time high of 29,433 rupees in early December.

India's wedding season will restart on January 15 and continue until April, after pausing for a few weeks deemed inauspicious for nuptials.

Premiums in Singapore declined from earlier this week to $1-$1.30 an ounce over spot prices, as higher prices prompted selling while buying remained tepid, dealers said.

Spot gold traded at about $1,645 an ounce, headed for a third consecutive session of gains. Prices have gained more than 5 percent so far this year.

Physical buying from China, the world's second largest gold consumer, was lukewarm and was expected to tail off next week ahead of the Lunar New Year holiday in the following week.

Physical buying related to the Lunar New Year should have already been finished, as we are only a week away from the holiday, said Peter Tse, director at ScotiaMocatta in Hong Kong.

Mainland China imported a record 102.525 tonnes of gold from Hong Kong in November, up 20 percent from the previous month, continuing a trend of sharply rising purchases.

Premiums in Hong Kong were steady around $2 an ounce, dealers said.

WEEK AHEAD

China's demand is likely to weaken next week, as factories start to close shop ahead of the Lunar Near Year holiday.

Traders are cautious about the price outlook in the short term, citing uncertainties that the euro zone debt crisis has cast on the global financial markets. Demand from India will largely hinge on the performance of its currency, they said.