MANILA/MUMBAI: Most physical gold buyers in Asia stayed off the market this week as the price surged to its highest since October, widening discounts in India and leaving demand largely lethargic in China ahead of next week's Lunar New Year holiday.

Spot gold climbed as much as $40 an ounce this week to peak at $1,157.20 on Thursday, bolstered by a weaker dollar as doubts grew on whether the U.S. Federal Reserve can raise interest rates this year in the face of a slowing global economy.

"We've only seen moderate buying on the physical side," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers Ltd in Hong Kong.

Premiums in Hong Kong ranged between 90 U.S. cents and $1.10 an ounce over the global spot, said Leung, compared to 70 cents to $1.50 last week.

The week just before the Lunar New Year tends to be a slow period for gold demand in China, with buyers usually securing supplies weeks before the country's biggest festive season.

"For the better part of February it will be a quiet time for precious metals business in China," said a trader at a Shanghai bank.

Gold premiums in Shanghai were modest at $1.50-$2 an ounce earlier in the week before flipping to a small discount on Thursday and Friday as trading activity thinned ahead of the week-long holiday, traders say.

"If the price remains where they are now, there won't be much physical demand even after the holiday," said William Wong, assistant head of dealing at Wing Fung Precious Metals in Hong Kong.

In India, tepid demand forced dealers to offer discounts of up to $10 an ounce to the global spot, against a discount of $6 last week.

"People are liquidating stocks they imported at lower price in December. Since demand is weak, they have to offer discounts," said Saurabh Gadgil, vice president of Mumbai-based India Bullion and Jewellers Association (IBJA).

"Retail consumers are struggling to adjust with higher prices. They are postponing big purchases hoping the government will reduce import duty in the budget," Gadgil said.

India raised import tax on gold to 10 percent to curtail demand, but it instead boosted smuggling of the bullion. The Indian government will present the annual budget for 2016/17 on Feb. 29.

Indian gold touched a five-month high of 27,434 rupees ($405.86) per 10 grams on Thursday.

($1 = 67.5950 Indian rupees)