India, the world's largest gold buyer, has cut imports in anticipation of volatile prices as the United States prepares to launch a military assault on Iraq, traders said on Wednesday.

"The market is a little nervous at the moment. We don't know whether it will be a short and decisive war or a dirty one, involving chemical and biological weapons," said Ranjit Rathod, a gold trader based in Chennai.

Traders said imports have slowed sharply, sufficient to cover immediate requirements and maintain a small inventory. India annually imports 500 to 600 tonnes of gold.

That could change if world prices fall.

"There will be a rush for imports if prices fall to $325 an ounce," said Nayan Pansare, a senior official of trading firm Inter Gold Ltd.

Pansare said prices may rise when the war begins but may quickly lose steam.

The US-imposed deadline to attack Iraq expires on Thursday.

"I don't think speculators will be much interested in gold now as the uncertainty is soon likely to be over. Physical demand will guide prices."

Traders said retail purchases had marginally fallen as there were few auspicious days for marriages in the next two weeks.