Gold Demand in India and Asia

By Rajendra Jadhav and Ashitha Shivaprasad

(Reuters) – Gold demand in India increased this week due to a price correction, though market volatility caused some buyers to delay purchases. In China, premiums strengthened due to safe-haven buying.

“There is a lot of pent-up demand in the market. Buyers were desperately waiting for a price correction. Since prices have corrected, they are coming forward,” said a Mumbai-based bullion dealer. Unfortunately, large fluctuations in prices are confusing buyers.

As of Friday, domestic prices in India were around 69,600 rupees per 10 grams, recovering from a four-month low of 67,400 rupees on July 25.

Dealers charged a premium of up to $9 an ounce over official domestic prices, which includes a 6% import duty and a 3% sales levy, an increase from last week’s $7 premium.

The price correction comes just before the festival season this month, with high expectations for orders during the ongoing India International Jewellery Show in Mumbai, according to a New Delhi-based dealer.

In China, dealers sold gold at par to an $18 premium, a significant increase from last week’s $2 discount to an $8 premium. Retail sales of gold jewelry in China remain subdued, but there is heightened interest in gold bars as a safe-haven asset, noted Bernard Sin, regional director of Greater China at MKS PAMP.

China’s central bank refrained from buying gold for the third consecutive month in July, with most analysts anticipating a resumption of purchases soon, though some expect the pause may last for a few more months.

Japanese dealers sold gold at premiums ranging from $0.25 to $1. Earlier this week, as Japanese stocks dropped sharply, individuals sold gold for cash to hedge other assets, returning to purchase when prices fell.

In Singapore, bullion was sold at par to a $1.25 premium per ounce, and in Hong Kong, it ranged between a $0.5 discount and a $2 premium.