By  Paul Ploumis 30 Sep 2015  Last updated at  08:29:09 GMT

NEW DELHI (Scrap Monster): The latest research note published by HSBC states that gold bullion prices are likely to face stiff resistance at current levels. This is on account of weakening gold demand in India- one of the two major gold consuming nations of the world, the other being China.

The extremely poor demand is evident from the fact that the yellow metal spot still trades at a discount when compared with international market price. The market trends have not yet given any indication of uptick in demand ahead of the upcoming festive and wedding season. According to James Steel, Senior Strategist, HSBC, import demand has not seen any revival, even in the wake of upcoming gold buying festival, Akshaya Tritiya.

As per estimates, India imported 137.8 mt of gold valued at $4.958 billion during the month of August this year, significantly higher by 69% over the previous month and by 178% over same month the previous year.

The rise in gold import during the month of August this year and the poor demand situation that existed in the country throughout the month suggests that domestic inventory levels for the yellow metal may still be at elevated levels. The reduced demand for gold from a major gold consuming nation like India may limit further upside in gold prices, HSBC noted. The upside cap in gold prices is on the assumption that any probable rise in gold demand in the country may not be sufficient enough to offset the reduced demand in China on account of week-long holidays to mark National Day celebrations.

According to trade sources, domestic gold in India traded at a discount of $8 per Oz on Monday. The discount dropped to $7 per Oz on Tuesday. The very fact that spot gold prices are trading at hefty discounts to international prices suggests lack of demand for the yellow metal in the country. Meantime, gold premiums in China dropped from $5-$6 per Oz during last week to $2 per Oz on Monday.