Physical gold prices flipped to a discount in India this week as elevated local rates amid a dive in the rupee dampened festive demand, with higher prices playing spoilsport across other Asian hubs as well.

Indians celebrated the Hindu festival of Dussehra on Oct. 5.

(However), "demand is very less. Prices are rising in global market and the Indian rupee is also falling," said Chanda Venkatesh, managing director of Hyderabad-based bullion merchant CapsGold.

India fulfils most of its gold demand through imports, which are becoming expensive with the rupee at record lows.

Local gold prices hit 52,093 rupees per 10 grams, the highest since Aug. 16, and to lure buyers, dealers offered discounts up to $6 an ounce over official prices — inclusive of 15% import and 3% sales levies — versus $2 premiums last week.

Gold-supplying banks have cut back shipments to India to focus on other markets with better premiums.

Benchmark global gold prices have risen above $1,700 an ounce, and with the dollar's ascent, Asian consumers end up paying more for bullion locally.

In Japan, gold was sold between on par with the benchmark to $0.5 an ounce premiums.

Amid the yen's plunge, investors were selling gold, Tokyo-based traders said.

China, closed for the Golden Week holiday, has seen premiums as high as $45 an ounce of late.

"If these prices hold up, I'd imagine the Chinese will come back as sellers next week" and medium term, it's worth buying gold to offset currency weakness, said Joseph Stefans, group head of trading, MKS PAMP.

In Hong Kong and Singapore, gold changed hands between $1 discounts to $2 premiums.

Vincent Tie, sales manager at Singapore dealer Silver Bullion said the "recent GBP panic has fanned the flames of currency devaluation worries" reminiscent of the 2008 Lehman crisis, prompting increased gold and silver buying.

(Reporting by Ashitha Shivaprasad in Bengaluru, Rajendra Jhadav in Mumbai; Editing by Arpan Varghese and Uttaresh.V)