Indian gold showroom
Employees wait for customers inside a gold jewelry showroom in New Delhi on Aug. 13, 2013. Reuters

Ordinary Indian gold investors, often feverish buyers in the world’s top gold consumer, have shown unusual restraint lately, a research note from UBS AG (VTX:UBSN) reported Monday.

Low Indian physical gold demand comes in spite of the holiday season there, which kicked off with the Hindu festival Dussehra on Oct. 13 and continues with the major Diwali festival on Nov. 3.

“Buying of late has been softer versus the same period last year,” UBS precious metals analyst Joni Teves wrote in the note. “In the four weeks leading up to Dussehra … our index was only 20 percent of levels in the same period last year. Given performance over the last several weeks, the outlook for physical gold buying doesn’t seem very promising.”

The depressed demand comes despite gold prices in Indian rupee terms remaining about 18 percent below 2013’s peak. Still, gold prices have risen 5 percent from October lows. Gold opened at $1,316 per ounce in New York on Monday, slightly up after ostensibly bearish news last week of the break in the U.S. political deadlock.

Gold suppliers also may be taking their time to figure out fresh Indian government regulations, imposed this year and only recently clarified, which mean importers must export out 20 percent of all imported gold.

The low physical demand may also suggest that smuggled gold has so far satisfied the needs of ordinary buyers this summer, wrote Teves.

“The absence of pent-up demand from India is discouraging for gold as it diminishes the potential price lift due to seasonal appetite from this important market,” she wrote.

The delayed U.S. employment data for September is due on Tuesday, a key indicator as gold markets track the state of the world's largest economy. Meanwhile, in the U.S., the world’s biggest gold exchange-traded fund, SPDR Gold, has lost about 10 metric tons of holdings each week in October, down to 882 metric tons as of Monday.