Physical gold buyers in Japan took advantage of a dip in domestic prices this week following a surprise policy tweak by the central bank, while buying in top consumer China was subdued by a surge in COVID-19 infections.

The jump in yen resulted in a fall in gold prices, leading to strong buying interest, a Tokyo-based trader said.

Gold priced in yen dropped to its lowest in 12 weeks after the Bank of Japan relaxed its iron grip on long-term interest rates, pushing the yen up roughly 4% against the dollar, its largest one-day gain in 24 years.

Premium of $0.50 an ounce was charged in Tokyo this week, while premiums in China dipped to $8-16 range over global benchmark spot prices from last week's $10-20.

"The surge in COVID-19 cases in China is a concern and would likely impact domestic gold demand negatively if we return once again to supply chain difficulties," said independent analyst Ross Norman.

In India, gold discounts widened to the highest level in nearly six months as demand plunged.

Retail buying was badly affected by price rise in the past few weeks, said Harshad Ajmera, proprietor of Kolkata-based wholesaler JJ Gold House.

Local gold prices jumped to 55,220 rupees per 10 grams this week, the highest since March 8.

Dealers were offering a discount of up to $30 an ounce this week over official domestic prices — inclusive of the 15% import and 3% sales levies, up from the last week's discount of $25.

Jewellers were not making purchases even after offering hefty discount as there is uncertainty over demand, said a Mumbai-based dealer with a private bank.

Singapore dealers charged $1.50-$3.00 premiums, unchanged from last week. 

(Reporting by Ashitha Shivaprasad and Rajendra Jhadav in Mumbai; Editing by Arun Koyyur)