Indians celebrated the festival of Diwali this week, following Dhanteras on Nov. 13.
"Jewellery showrooms have been witnessing higher footfalls for the last few days. Retail jewellery demand has improved," said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.
Dealers charged premiums of about $2 an ounce over official domestic prices, inclusive of 12.5% import and 3% sales levies, down from $4 last week.
Though buyers were seeking out gold, "overall demand is still expected to be down year on year by 10%-30% in tonnage terms, though it may be stronger in US dollar terms", Standard Chartered said in a note.
On Friday, local gold futures were trading around 50,083 rupees per 10 grams, still at historically elevated levels but more than 10% below the all-time high of 56,191 rupees they hit in August.
The correction lured back many buyers who had been put off by higher prices, said a Mumbai-based dealer with private bullion importing bank.