MUMBAI/BENGALURU (Reuters) – Gold demand turned fragile this week in India as local prices jumped to their highest level in 2-1/2-years, while traders in major buying centres in Asia pinned hopes on purchases ahead of the approaching Lunar New Year.

Local gold prices in India, world’s second-largest gold consumer, touched their highest since July 2016 this week.

“Prices are just moving higher and higher. Buyers are waiting for a correction in prices and the annual budget as there is speculation of a duty cut,” said a Mumbai-based dealer with a bullion importing bank.

Prime Minister Narendra Modi’s government will present the budget on Feb. 1.

The bullion industry has been urging a tax reduction to combat smuggling, which has increased since India raised the import duty to 10 percent in August 2013, to narrow its current account deficit.

The industry speculates about the duty cut every year before the budget but the government hasn’t made any change in the tax structure in last six years, the dealer quoted earlier said.

Dealers in India were offering a discount of up to $7 an ounce over official domestic prices this week, up from last week’s discount of $6. The domestic price includes a 10 percent import tax.

“Supplies are limited in the market due to lower imports in last few weeks,” said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.

India’s gold imports in December fell 24.3 percent from a year ago to $2.57 billion, trade ministry data showed earlier this week.

Premiums in top consumer China stood mostly unchanged from last week at $6 to $9 an ounce.

Buying has been drying up a bit, said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.

“Firstly, some restocking (by jewellers for Lunar New Year) has already been done, and secondly, the appreciation of the yuan has kept the Chinese gold price stable without much volatility.”

Traders expected demand to pick up ahead of the Lunar New Year, which falls during the first week of February, since gold is considered a popular gift during this period.

In Singapore, premiums firmed slightly to 80 cents to $1.50 from last week’s 60 cents-$1.50 range, while Hong Kong premiums were unchanged from last week at 60 cents-$1.30.

“We have seen quite a number of retail buying at this point of time due to the (Lunar) New Year and also, people are looking at gold as a safe haven asset,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.

In Japan, gold was sold on par with the benchmark, due to weak demand and higher prices, a Tokyo-based trader said.