Gold Bullion fell back to $1680 per ounce by the end of Thursday morning in London, having rallied to a two-week high yesterday following news of the deal to avert the so-called fiscal cliff in the US.

"Precious metals, including gold, [were] able to profit from the euphoria among market players in the wake of the compromise reached in the US budgetary dispute," says today's commodities note from Commerzbank.

Silver also ticked lower this morning, dropping back below $31 an ounce, while other commodities also dipped and the US Dollar gained.

India's central bank meantime has announced a series of policy proposals aimed at curbing Indian gold imports.

After yesterday's rally in stocks, European indexes eased lower Thursday morning.

US president Barack Obama yesterday signed into law the bill to avoid the so-called fiscal cliff of spending cuts and tax cut expiries, after it was approved by the House of Representatives on New Year's Day.

"We see yesterday's jump in risk assets as a one-off response to the US budget vote and expect consolidation today," said a note from Credit Agricole this morning.

The fiscal cliff deal postponed planned spending cuts for two months, meaning these will still need to be debated, as will the issue of raising the government's $16.4 trillion debt ceiling.

"The fact that Congress has left so many key items up in the air will likely provide a measure of support for gold," reckons Ed Meir, metals analyst at brokerage INTL FCStone.

"It reinforces the general notion – now evident practically the world over – that politicians are losing control of their monetary base. This only makes the case for owning gold as an alternative 'shadow' currency all the more stronger."

"Central bankers everywhere continue to debase their currencies and the financial markets prove treacherous," adds Byron Wien, chairman of Blackstone Group, writing in his annual '10 Surprises' list, which predicts gold will reach $1900 an ounce.

Over in India, traditionally the world's biggest gold buyer, the central bank has published a draft report from its Working Group on gold, set up to examine the impact of gold imports on India's economy.

"Large gold imports are adversely impacting the current account deficit," says the report from the Reserve Bank of India's Working Group.

"There is a need to moderate the demand for gold imports."

Among the Working Group's suggestions is raising the loan-to-value limit for gold loan companies from 60%, which the RBI brought in last year, to 75%. Shares in gold loan companies Muthoot and Manappuram rallied earlier today following the report's publications.

Other policies suggested by the report include encouraging people to invest in gold-backed financial instruments rather than buy gold itself, as well as "fiscal measures" to reduce gold imports. 

On Wednesday, India's finance minister said the government is considering raising the import duty on gold bullion.

"Fiscal initiatives may be appropriate, but they have to be implemented very carefully," said C Rangarajan, economic advisor to India's prime minister, in an interview with Indian television Thursday.

"We need to calibrate it in such a way that it does not result in an increase in the smuggling of gold... part of the reason for the high level of imports is the high level of inflation...if inflation rates start coming down, I expect gold imports to also come down."

Indian gold dealers and jewelers meantime expect gold demand to rise by up to 15% in the first quarter of 2013 compared to the final three months of last year, the Economic Times reports.

"Farmers are expecting better [harvest] returns this year," says Bachhraj Bamalwa, chairman of the All-India Gem & Jewellery Trade Federation.

"Moreover, the wedding season will be in full swing from January. This will give a fillip to rural demand."