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The physical gold market in India flipped to a discount this week as a rebound in domestic prices made buyers walk away, while premiums in China retreated further from recent highs.

Dealers in India were offering a discount of up to $2 an ounce on official domestic prices, inclusive of 15% import and 3% sales levies, versus last week’s $5 premiums, the highest in 17 months.

“The sudden price increase came as a surprise and disrupted the momentum the market had finally gained after a long time,” said a Mumbai-based dealer with a private gold-importing bank.

Local gold prices were trading around 58,200 rupees per 10 grams, after falling to 56,075 rupees last week, the lowest since March 10.

Jewellers were confounded by the price rise and were concerned that higher prices during the upcoming festival season could restrict retail purchases, said a New Delhi-based dealer.

Demand in India, the second biggest gold consumer, usually strengthens towards the end of the year during traditional wedding season and major festivals, including Diwali and Dusherra, when bullion buying is considered auspicious.

In China, which reopened after the Golden Week holidays, gold premiums slipped to $40-$60 per ounce, compared with $80-$100 charged two weeks ago over global benchmark prices, which were set for their best week in seven months.

“Quotas have been allocated to various banks, and it is anticipated that they have been put to use,” said Bernard Sin, regional director of Greater China at MKS PAMP.

“The decline in gold premium from $120 to its current level of $50 seems to suggest a downward trend, and there is anticipation of a convergence in the near future,” he added.

In Hong Kong, bullion was sold at premiums between $1.00 and $3.50 per ounce, and between $2.20 and $3.00 in Singapore.

In Japan, dealers sold gold at $0.50-$1.00 premiums. unchanged from last week.

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