MUMBAI/BENGALURU (Reuters) - Physical gold buying stalled in top Asian hubs this week as consumers sold back bullion to cash in on a steep price rally, while a recent import duty hike further dented waning interest in an Indian market hit by a surge in local rates.
Global benchmark spot gold is on track to notch up a weekly gain and has risen about 10% this year.
Refineries have been swamped with scrap metal with more customers selling back their gold, dealers said.
“Demand is quite weak, especially with prices over $1,400 an ounce,” said Dick Poon, general manager at Heraeus Precious Metals in Hong Kong.
In top consumer China, gold was sold at a premium of $10-$13 an ounce over the benchmark this week, versus last week’s $11-$12 amid muted activity.
The premiums might still not cover transportation and other costs, Poon added.
Graphic: India's gold market tmsnrt.rs/2b1Tl6J
India also saw subdued demand for gold as a surprise hike in import duty to 12.5% from 10% last week pushed up prices to a record of 35,145 rupees per 10 grams on Thursday.
“Retail buying has been weak since the start of the month. The duty hike further eroded retail purchases,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern city of Kolkata.
Supplies are limited but the market is in discount due to weak demand, said a Mumbai-based dealer with a private gold importing bank.
Dealers were offering a discount of up to $20 an ounce over official domestic prices, down from $30 last week, the highest since August 2016. The domestic price includes the 12.5% import tax and a 3% sales duty.
Activity was lacklustre in Hong Kong as well, where gold was sold at anywhere from a discount of 30 cents to a $1.20 premium, compared with premiums of $0.50-$1.20 last week.
While customers are selling, there is still some interest from investors to bullion as a hedge against current geopolitical and economical uncertainties, said Joshua Rotbart, managing partner at J. Rotbart & Co in Hong Kong.
In Singapore, premiums of $0.60-$1 were charged, versus $0.40-$0.60 previously.
“When prices dipped below $1,400, we saw some clients coming in. But increasingly, more customers have been switching to (cheaper) silver,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.
The gap between gold and silver has widened almost without interruption since 2011.
Preference for silver has been prevalent in South Korea, said Samson Li, a Hong Kong-based precious metals analyst with Refinitiv GFMS, saying several Chinese investors lost money when they bet on higher silver prices and lower gold rates.
Japan saw muted activity, with bullion sold at par with the benchmark compared with $1-$1.25 discounts offered last week, a Tokyo-based trader said.
Reporting by Arpan Varghese and Brijesh Patel in Bengaluru and Rajendra Jadhav in Mumbai; Editing by Edmund Blair