Gold spot traded at $1,473.18 per ounce on Wednesday, around 7 percent lower than on April 11, the day before a 14 percent two-day tumble, the worst since 1983.

But many institutional investors have viewed the price slump as temporary and an over-reaction.

Mitul Kotecha, head of global markets research Asia and global head of foreign exchange strategy with Credit Agricole, wrote in a research note last month that the recent sharp drop in the price of gold looked "overdone", with some "bargain hunting" likely, in terms of jewelry demand.

Over the longer term, he added, central bank diversification into gold will lend some support and limit the pace of the price decline.

"We will likely see a slower pace of price decline, underpinned by continued purchases from the official sector," he wrote.

HSBC Holdings PLC said it believed a pick-up in demand from China and India, combined with producers cutting their supplies, will support a stable recovery in the gold price.

Chinese customers are not the only ones snapping up bargain gold.

Gold coin sales by the United States Mint are heading for their highest levels in three years.

Sales totaled 209,500 ounces in April, up from 62,000 ounces a month earlier, data on the mint's website revealed. The amount for December 2009 was 231,500 ounces.

Demand for gold in India, the world's biggest consumer, is double the level for this time of year, Rajesh Mehta, chairman of Rajesh Exports Ltd told Bloomberg on Wednesday.

 

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