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Gold coins, jewellery and bars looked like a bargain after prices crashed more than $200 an ounce in two days last month, the steepest two-day plunge in more than 30 years.
Shops reported an unprecedented surge in demand and mints and refineries were working overtime to keep up.
But retailers say this enthusiasm, which helped push prices back up again, is faltering with some investors looking for another fall before they buy more.
Ryotaro Tomori, shop manager of Ginza SGC in Tokyo, said some forms of coin and ingot are in short supply but more customers now want to sell gold after the mid-April rush.
"We've realised how sensitive Japanese people holding spendable money are to gold prices," said Takeshi Sakai, general manager of Mitsubishi Materials Corp's precious metals division.
"We had a rush of customers on April 15, 16 and 17, and then retail prices have somewhat settled down."
In India, the world's biggest buyers of the metal, households took advantage of the price drop, bringing forward purchases ahead of Akshaya Tritiya, an April-May religious festival celebrated with gold buying, and the start of the wedding season.
Mumbai-based jeweller Umedchand Tilokchand Zaveri said his customer footfalls have now reduced to five customers in peak hours from 15 customers two weeks ago, when prices slumped.
"Buying has slowed down as (customers) are waiting for gold prices to come down after Akshaya Tritiya," said proprietor Kumar Jain.
Demand from mints and refineries shot up in the immediate wake of the price drop. Sales of American Eagle gold coins from the U.S. Mint are ten times last month what they were in April last year while Australia's Perth mint had to double its minting capacity.
The drop in the price of the standard gold bars that are traded on international markets drove the markup price of bullion products such as coins and smaller ingots, higher.
Premiums in Hong Kong, the centre of bullion trading in east Asia, rose to their highest since October 2008, though they have now steadied at that level. Dealers in the Middle East report that premiums have drifted down from their recent peaks.
Speculators bearish
While buyers of coins, bars and high-carat jewellery have been quick to jump into the gold market after its recent price drop, speculative investors, who favour futures and gold-backed investment funds have driven the gold market in recent years.
It was these buyers who pushed prices to a peak of $1,920.30 an ounce in September 2011, more than double the level seen after Lehman Brothers collapsed in 2008.
It was also largely their selling that precipitated last month's slide to two-year lows of $1,321.
While buying of coins, bars and other forms of physical gold has helped arrest gold's slide -- it was trading at $1,463 at 1230 GMT on Wednesday -- it is unlikely to negate the impact of dwindling appetite among bigger investors.
Outflows from gold-backed exchange-traded funds are continuing apace, with holdings of the ETFs tracked by Reuters declining more than 200 tonnes so far this month.
"You have a continued flow of metal out of ETFs, you've got some bits and pieces of hedging business going through, you have investors who are liquidating from other OTC sources when you get close to the top of the range (from $1,400 to $1,480)," Credit Suisse analyst Tom Kendall said.
"That's being offset at the moment by that physical demand, (but) this is not something that is ever going to drive gold upwards in a sustained fashion for a long period of time. These buyers are price sensitive and they are not going to be buying indefinitely if the price goes up."
While the recent surge in demand has been broad-based, it is the long-established but highly price-sensitive Middle Eastern, Chinese and Indian gold bullion markets that are responsible for the lion's share of buying.
In recent years rising prices have swiftly curbed demand in India and the Middle East, suggesting those buyers will wait until they can find another bargain.
(Additional reporting by Daniel Fineran and Humeyra Pamuk in Dubai, Risa Maeda in Tokyo, Rebekah Kebede in Sydney, Siddesh Mayenkar in Mumbai, Lewa Pardomuan in Singapore)
