Expectations of limited upside in prices of gold could dent imports into India, pushing shipments down by a fourth in the March quarter, with prices remaining steady below last year's record till June-end, a Reuters poll revealed.

Gold imports to India, the world's biggest buyer of bullion, could fall to 220 tonnes in the March quarter, down from 286 tonnes imported last year during the same period, a poll, which included estimates from Scotia Mocatta, Corporation Bank and Karvy Comtrade among others, said.

"The overall demand pattern has slowed down considerably after Diwali... I will not be surprised to see 2012 imports lower than 2011 imports," said an official with one of the private banks polled by Reuters.

He said that limited upside in prices will have a negative effect on gold demand.

India imported 753 tonnes of the yellow metal in the first nine months of 2011, up 21 percent on year, according to data from the World Gold Council (WGC). A trade body estimates imports to fall to 878 tonnes in 2011, down 8 percent over 2010.

Import data is due to be out by the third week of February from the WGC.

Gold prices have been trading in a very narrow range of 26,517-28,194 rupees per 10 grams since mid-December and has only gained 2 percent, as investors preferred investments into stock markets, that posted its best rise since 1998 in January.

The Reuters poll of 14 participants revealed gold prices could edge higher in the March quarter to 28,250 rupees per 10 grams, almost steady from Friday's price of 28,190

rupees. The yellow metal could ease to 27,537 rupees in June quarter.

"In the present conditions, cash is king and investors are not flocking to gold for safety," said Kishore Narne, senior vice president, and head of commodity and currency research, AnandRathi Commodities.

Importers and analysts said last month's duty hike in precious metals would hardly impact demand as the tax incidence is minimal compared to the volatility in prices.

"Import duty is hardly any matter for consumers. Anyway there is price volatility of 5-10 percent in prices... so 60 rupees per gram will hardly make any difference," said a official with state-run Corporation Bank, who overlooks gold operations.

The federal government hiked the import duty to 2 percent on value on gold and 6 percent on value on silver from January 17, pushing up prices of the precious metals.

"I don't think tax will impact imports as this trend of slowdown in demand has been witnessed much before the duty hike," said the official with private bank.

NEW PEAK

Prices could recover to surge to a new record of 29,750 rupees by September end helped by easy monetary policy, surpassing the November 2010 peak of 29,516 rupees.

"Gold still holds on to the structural pillars of support in an environment of negative real interest rates and rising inflationary pressures, as well as continuing central-bank buying," said Narne.

"Hence, we expect a revival in prices."

The Federal Reserve's pledge to keep U.S. interest rates at rock-bottom levels for a number of years and hints at fresh monetary easing are set to fuel further gains in gold as the moves cut the opportunity cost of holding bullion and keep the dollar in check.

Several big gold importing banks including Scotia Mocatta and HDFC bank estimated gold to breach the 30,000 rupees per 10 grams mark by the end of September quarter.