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MUMBAI/BENGALURU (Reuters) - Gold demand in Asia gathered some steam this week on wedding season purchases in India, with prices swinging to a premium there for the first time in over a month, and traders expecting demand to strengthen due to the upcoming Chinese New Year.
"The physical demand in Asia has been very good," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central, adding that premiums are also high due to a production shortage.
Dealers in India, the world's second-largest consumer of the metal, were charging a premium of up to $1 an ounce this week over official domestic prices, compared to a discount of up to $4 last week. The domestic price includes a 10 percent import tax.
"Cash supply is improving. Consumers are making purchases for weddings," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.
In November, Prime Minister Narendra Modi scrapped 500- and 1,000-rupee banknotes, or 86 percent of the value of cash in circulation, as part of a crackdown on corruption, tax evasion and militant financing.
"Banks and other agencies have reduced imports in the last few weeks. That's why despite moderate demand they could charge a nominal premium this week," said a Mumbai-based dealer with a private bank.
Gold imports in December fell 71 percent from a year ago to 31 tonnes as the cash crunch squeezed demand, said Sudheesh Nambiath, a senior analyst at GFMS, a division of Thomson Reuters.
In China, the world's top gold consumer, gold was sold at a premium of between $17 and $20 an ounce to the global benchmark, against a $20 to $22 premium in the previous week.
Traders are expecting a seasonally strong demand for yellow metal in China due to the upcoming Lunar New Year.
Gold on Friday slipped from the one-month high touched in the previous session on a surge in dollar, although bullion was on track to end the week about 2 percent higher.
Among other gold trading centres, bullion was sold at a premium of $1.40 an ounce in Hong Kong and Singapore, nearly unchanged from last week.
Prices in Tokyo, however, were at a discount of $1 per ounce this week.
($1 = 68.00 Indian rupees)
Additional reporting by Nallur Sethuraman in BENGALURU; Editing by Christian Schmollinger