Asia Gold-Diwali spurs buying in India; China premiums dip

* China premiums at $2-$3/oz vs $7-$11 last week

* Indian dealers charge premium of about $0.5

By Rajendra Jadhav and Eileen Soreng

Oct 29 (Reuters) - Physical gold was selling at a premium in India this week as consumers flocked to retailers ahead of big festivals next week, while premiums in top consumer China dropped.

Dealers in India were charging a premium of up to $0.5 an ounce over official domestic prices — inclusive of the 10.75% import and 3% sales levies — this week, up from last week’s discount of $1.5.

Indians will celebrate Diwali and Dhanteras festivals next week, a holiday period when buying gold is considered auspicious.

"Retail buying is picking up. Jewellery stores are witnessing good footfalls," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.

"Sentiments are upbeat. Jewellers are expecting robust demand during Diwali festival next week," said a Mumbai-based dealer with a private bank.

India's gold demand could strengthen significantly in the fourth quarter, the World Gold Council (WGC) said on Thursday.

Meanwhile, premiums in China dropped this week to $2-$3 an ounce, charged over global benchmark spot prices, compared with $7-$11 an ounce last week.

"We are hearing quite a lot of talk about the economy slowing down," said independent consultant Robin Bhar, who said that in such a scenario people might cut down on their gold purchases since gold buying is dependent on income growth.

But traders see demand picking up as consumers prepare for the Chinese New Year early next year.

Premiums in Singapore were at $1.40-$1.70 an ounce versus last week's range of $1.25-$1.70 per ounce.

"We started to see more retail clients coming to buy because they're probably thinking that gold prices more or less have stabilised so they wanted to get some gold positions at this point of time," said Brian Lan, managing director at Singapore dealer GoldSilver.

Gold was sold at premiums of $0.50-$1.50 in Hong Kong, while Japanese markets operated at about a $1 premium.

(Reporting by Rajendra Jadhav in Mumbai, Eileen Soreng and Nakul Iyer in Bengaluru. Editing by Jane Merriman)