India gold traders stayed on the the sidelines on Tuesday afternoon waiting for price

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dips, even as they digested the impact of the import duty hike announced last week, dealers said.

The government in its budget on Friday raised the duty on imports of gold and platinum to 300 rupees ($6.5) per 10 grams from 200 rupees earlier, while for silver, the duty was hiked to 1,500 rupees per kg from 1,000 rupees earlier.

"After the custom duty hike, the outright sales have slowed, I indented for a very minimal quantity today," said a state-run bank dealer in Mumbai.

International spot gold, which guides the domestic market, was $1,116.30/1,117.30 an ounce at 2:31 p.m., as against the previous close of 1,118.40/1,119.20.

"I have plenty of orders below $1,100 (an ounce)," said the state-run bank dealer.

India's increase in customs duties on precious metals is expected to hit imports just as they were starting to bounce back from sharp falls in 2009, traders and analysts said.

"We got our shipments cleared on that day itself (on Feb. 26)," said a dealer with a private bullion dealing bank in Mumbai.

"Mostly the traders will be affected by this as they survive on very thin margins, and now-a-days it is all transparent," said the state-run bank dealer.