Elevated domestic prices dimmed retail appetite for physical gold in India this week, while a resurgence in COVID-19 cases prompted dealers in China and Hong Kong to offer discounts.

Indian gold prices jumped to 55,558 rupees per 10 grams earlier this month, not far from the all-time high of 56,191 rupees hit in August 2020.

"Prices are very volatile. Consumers are hoping prices may not sustain at higher levels," said a Mumbai-based dealer with a private gold importing bank.

Dealers offered discounts of up to $45 an ounce over official domestic prices — inclusive of 10.75% import and 3% sales levies - versus last week's $77 discounts, a near six-year peak.

The flow of old jewellery and coins has moderated amid the price volatility, said a New-Delhi based bullion dealer.

In China, discounts widened to between $4 and $6 an ounce over global benchmark spot rates from $2 to $4 the previous week.

In Hong Kong, gold was sold at anywhere between on par with the benchmark rates to $4 discounts, versus $3 discounts last week.

Regional physical demand is patchy, given the COVID-19 situation in China and the massive discounts in India and there is no question that the physical demand in Europe and Asia that propped the market up has weakened, said independent analyst Ross Norman.

But demand from institutional buyers continues to be robust, Norman said. Gold in Singapore, meanwhile, continued to trade at premiums of about $1-1.80 an ounce. While businesses and retail investors have started purchasing gold as prices pull back from recent highs, "we've seen a lot more selling" since prices are still comparatively elevated," said Brian Lan, managing director at dealer GoldSilver Central.

"Some jewellers are having a tough time because our retail side isn't doing as well. So that's why they probably are selling out the inventory to take profit," Lan added.

(Additional reporting by Asha Sistla in Bengaluru; Editing by Arpan Varghese and Aditya Soni)