Asia gold: Price volatility keeps India demand modest, China flips to discount

BENGALURU: Gold demand was modest in India this week as prices fell to their lowest level in two-and-a-half months and remained volatile, while top consumer China flipped to a discount for the first time since late December.

Dealers in India quoted discounts of up to USD54 an ounce over official domestic prices this week, inclusive of 15percent import and 3percent sales levies, widening from last week’s discounts of up to USD35. “The price correction is helping bring buyers back to the market, but excessive volatility is prompting some buyers to wait for a clearer price trend,” said an Ahmedabad-based jeweller.

Domestic gold prices fell to 146,252 rupees per 10 grams on Friday, the lowest since April 2. “Investment demand has remained weak over the past few weeks. However, jewellers are showing some interest in building inventories,” said a Mumbai-based bullion dealer with a private bank. India’s physically backed gold exchange-traded funds (ETFs) recorded their first net monthly outflow in a year in May, driven by profit-taking following a price rally on higher import duties.

In China, bullion shifted to discounts of USD4 to USD8 an ounce to the global benchmark spot price, compared with premiums of USD1 to USD5 last week, as investors stayed on the sidelines awaiting further details on the US-Iran deal.

Gold prices have fallen over 23percent since the start of the US-Israeli war against Iran in late February, pressured by fears of energy-driven inflation and expectations of higher US interest rates. “The physical gold market in Shanghai remains very quiet, and I am not seeing much buying interest. Investors across China are still concerned about uncertainty in the Middle East and are waiting for a clearer picture,” said Peter Fung, head of dealing at Wing Fung Precious Metals. “Demand may pick up after the holidays or maybe in July or August.” Markets in mainland China and Hong Kong were closed for the Dragon Boat Festival holiday on Friday.

In Hong Kong, gold traded between par and a USD2 premium, while in Japan, it was sold at a discount of USD0.25. In Singapore, gold was sold between a USD0.50 discount and a USD1.80 premium.