Dec 17 - Trade interest on the physical gold market has thinned towards the end of the year, but traders on Friday hunted for bargains as prices eased from record highs last week and next year looks bullish.

Bars of gold inside the largerst exporter of gold in the world in Bangalore, India

In India, the world's largest gold consumer, physical demand has ebbed as the wedding season nears an end, and traders were unwilling to take bulk positions to the end of the year.

It’s the end of the season for us, we would all like for a holiday now. I am not inclined to take any further positions. I will place my new indents in early January, said Daman Prakash, director with Chennai-based wholesaler MNC Bullion.

Gold on the Multi Commodity Exchange of India was nearly flat at 20,492 rupees per 10 grams. The contract is still down two percent from the all-time high of 20,924 rupees hit on Dec. 7.

"Even suppliers would keep their stockpiles low now due to year-end, said an official with a state-run bullion importing bank.

Premiums in Hong Kong have remained stable at about 70 cents to $1 above London prices, dealers said.

"There is light buying in the market, and people believe there is not too much room for gold prices to go down," said a Hong Kong-based dealer.

The bullish sentiment kept buy-on-dip trades going on, dealers said.

"I can see quite a bit of buying interest at the price level. As the market is very bullish, people think prices will go further up. After prices came down, people just grab the opportunity to go in," said a Singapore-based dealer, adding buyers from Thailand, Cambodia and Vietnam were among the active bargain hunters.

Spot gold was trading just below $1,380, down from the peak above $1,430 last week. Prices are likely to trade in range between $1,370 to $1,420 in the rest of the year, traders said.

WEEK AHEAD

With Christmas looming on the horizon, the physical market is expected to quiet down, but prices might be choppy as small trades could cause volatility.

Demand, especially from investors, is expected to further rise in the new year. A drop in prices to 19,500-20,000 rupees per 10 grams could also see demand spurt, said an official with a state-run bullion importing bank in India.

By Rujun Shen and Siddesh Mayenkar
(Editing by Ed Lane)