Factories gear up for Ramadan, premiums steady

SINGAPORE: Jewellers in Indonesia have started making inquiries ahead of the month of Ramadan, and jewellers in Hong Kong are happy to buy on dips but volatile bullion prices have scared off investors in Japan, dealers said on Monday.

Top consumer India showed little interest, with wedding season demand exhausted. Farmers are busy sowing during the monsoon season in India, where demand for gold hinges on a good monsoon to boost agriculture output and incomes.

Gold shed early gains to trade around $1,537 an ounce, but the metal was still supported by debt crisis woes in Europe after the region's ministers delayed a decision on emergency loans to Greece. Gold hit a record around $1,575 in May.

"We're seeing physical buying from Thailand but I don't think it's related to the election in July," said a physical dealer in Singapore.

"I would say volume-wise, there's nothing special, but factories start to get a bit busy in Indonesia. In fact I am getting some requests for gold bars. I guess they are preparing for Ramadan."

Premiums for gold bars were steady from last week at 60 to 80 cents to the spot London prices in Singapore. Sales of scrap could increase if gold extends gains, having risen above $1,541 on Friday -- its biggest one-day gain since May.

"I already saw some selling last Friday and also this morning. But we can expect to see more scrap in the next few days," said another dealer in Singapore.

Premiums for gold bars were also steady in Hong Kong at 80 cents to as high as $1.30 to the spot London prices.

"There's a small amount of buying from jewellery makers after the weekend. We've got short covering," said a physical dealer in Hong Kong. "But there's also selling because some people want to take profits too."

Dealers expected premiums to stay at current levels in Singapore and Hong Kong but the value could slip in Tokyo because of a lack of interest from investors and the industrial sector.

Gold bars were on par with London prices in Tokyo, unchanged from last week.

"Trading is very limited at this moment. I guess everyone is just watching prices. There's not much sale from the general public either," said a dealer in Tokyo.

Copyright Reuters, 2011