Asia Gold-Taiwan tensions stir some buying in China, India demand muted

(Corrects India's local gold prices in ninth paragraph)

* Retail demand down, especially in rural areas- India dealer

* Chinese premiums widen to $4-$11/oz

Aug 5 (Reuters) - Gold premiums in China rose this week on safe-haven demand driven by rising tensions with the United States over Taiwan, while higher domestic prices cooled buying activity in India.

Chinese dealers charged premiums of $4 to $11 an ounce over benchmark spot gold prices, compared with $4 to $8.5 last week.

An unannounced stop in Taiwan by U.S. House of Representatives Speaker Nancy Pelosi earlier this week prompted China to hold live-fire drills around the island Beijing considers its own.

"Tensions between the U.S. and China continued to escalate (and) the premium in SGE (Shanghai Gold Exchange) traded as high as $11 whilst no signs of import quota issued in coming days," said Bernard Sin, regional director for Greater China at MKS PAMP.

The People's Bank of China controls how much gold enters China through a system of quotas to commercial banks.

Despite the safe-haven boost, overall activity was subdued, said Peter Fung, head of dealing, Wing Fung Precious Metals.

Citi analysts said on Thursday an economic slowdown could crimp Chinese demand.

Hong Kong dealers sold gold between on par with the benchmark to $1.80 premiums.

In India, local gold prices hit their highest since July 5 at 52,525 rupees per 10 grams.

"Prices are very volatile. Buyers are struggling to understand the trend. They're postponing purchases," said a Mumbai-based dealer with a private bullion importing bank.

Dealers offered discounts of about $14 an ounce over official domestic prices — inclusive of 15% import and 3% sales levies — versus last week’s $6 discounts.

"Retail demand has slowed substantially, especially in rural areas. Prices need to correct by 3-4% to bring back buyers to jewellery stores," said a New Delhi-based dealer.

Singapore premiums were at $1.80 to $2.30.

"Prices have gone up, so there were less people looking to buy ... but we see a bit more selling from the wholesale side," said Brian Lan, managing director at dealer GoldSilver Central. (Reporting by Eileen Soreng, Brijesh Patel, and Ashitha Shivaprasad in Bengaluru, Rajendra Jhadav in Mumbai; Editing by Aditya Soni)