MMTC is the second biggest importer of the yellow metal in India.

“The first four months of the year had been good, but sales slowed in the past three-four weeks. The sudden rise of $150 (an ounce) has put everyone on the back foot,” Ved Prakash, director, MMTC, said ahead of a conference in southern state of Kerala on Aug. 19.

Gold prices have gained about 25 percent so far in the year to hit a record high of Rs.26,575 ($582) per 10 grams on Thursday.

Weak buying and record prices have prompted MMTC to lower its import estimate for the year to March 2012 to 250 tons from 265 tons. MMTC has also cut its silver import estimates to 1,200 tons from 1,500 tons.

Prakash, who is one of speakers at the conference, said MMTC had imported 92 tons in FY12 thus far, up 9.5 percent on year, while silver imports jumped 39 percent to 552 tons, mainly driven by huge buying in the first four months of the year.

Prakash said the “buying frenzy” in silver has ended, and could see a rise in imports only if prices rise marginally from here.

To cash in on the wedding and festival season demand that peaks during September-December, MMTC will focus on smaller towns for growth in sales.

“We will be concentrating in many more cities for exhibitions, where we have presence and even stockists,” said Prakash.

Traditionally, Indian brides carry jewelry and gilded gifts to their grooms’ house, which pushes up demand for the bullion during the period.

Demand from investors, who seek safeguard against inflation and economic worries, is likely to push gold prices up to a new record of $1,800 an ounce, but only after witnessing a minor correction, Prakash said.

“Correction in prices is unavoidable as most other metals have also corrected. There cannot be so wide gap between what consumers can pay and prevalent prices.”

Gold prices have more than trebled since 2003 and have been on a gaining streak for eight years in a row.

MMTC hopes to start production from its proposed refinery in northern state of Haryana in October, when sales peak for festivals and weddings. The refinery had been delayed due to installation of technology.

“Refining trials have started and by October we will be fully operational. We will do test marketing and all, and we have not fixed any targets,” said Prakash.

The refinery, in which MMTC holds 72 percent and Switzerland’s PAMP S.A. the balance, will manufacture mainly investment products in the form of coins and bars, which has gained popularity as consumers seek storage of wealth and reduction in wastage like in jewelry.

The refinery is expected to produce coins from 100 tons of gold in the first year.

India’s investment segment for gold is small, but has been growing faster than the jewelry segment as Indians realize the benefits of holding gold as an investment product.