They said the Indian rainy season, which agricultural experts predict will produce a bumper 1998 crop, was likely to spur gold re-exports from the Gulf Arab state by mid-September.

"Bullion export business should pick up around September 15 because dealers in India will start to re-stock and by October 10 retail business should start peaking," one trader said.

The southwest monsoon brings about 80 percent of the annual rainfall in India, where agriculture employs two-thirds of the workers and accounts for more than a quarter of its gross domestic product.

It largely determines demand for the metal in the world's largest gold buyer, which last year consumed about 737 tonnes.

"There should be very good demand for ten tola (TT) bars as the monsoon has been very good," a trader said, adding that the end of the monsoonsignalled the start of the wedding and festival season -- a boom time for Indian bullion dealers.

While traders predict good demand for the TT bar from Dubai, they say a large chunk of the demand will also be met directly from source thanks to the liberalisation of Indian import rules.

Late last year India allowed more state banks to import gold directly, effectively bypassing the redistribution hub of Dubai.

This has put pressure on the premium of Dubai's benchmark TT bar. Dealers said the premium -- which covers insurance costs and trader margin -- was at around $1 an ounce in the week to Sunday. This compares with the normal $1.25 premium.

"There has been a shakeout because of the direct shipments. Some traders who were depending on Indian demand for TT's are now undercutting the local sellers and so there is a price war. The premium is now at $1," one said.

The lower premium and weaker international gold prices pushed the price of the benchmark bar -- 3.746 ounces of 24-carat gold -- down to3,927 dirhams ($1,070) in Dubai from 3,960 dirhams a week earlier.

"There is still room for the premium to go down another 10 cents," one dealer said.

Spot international gold was last quoted on Saturday at $283.85/284.35 an ounce from $286.40/286.90 a week earlier.