May 24, 2019 / 1:42 PM / a month ago

India gold prices flip to premium as demand picks up

MUMBAI/BENGALURU (Reuters) - Gold prices in India flipped into premiums this week on firmer demand in the domestic market, while buyers in top consumer China took advantage of weaker bullion prices and stepped up purchases.

A saleswoman picks gold necklaces to show it to a customer inside a jewellery showroom on the occasion of Akshaya Tritiya, a major gold buying festival, in Kochi, India, May 7, 2019. REUTERS/Sivaram V

In India, dealers charged a premium of about $1 an ounce over official domestic prices. That contrasted with last week when gold was sold at a discount, of around $2, for the first time in 2-1/2 months.

Gold futures in India, the world’s second biggest bullion consumer after China, fell to 31,232 rupees per 10 grams earlier this week.

Retail demand has improved a bit since them due to the drop in prices, said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.

“The (stronger) rupee has been helping in bringing down domestic prices,” he said.

India meets most of its gold demand through imports. A strong rupee makes imports cheaper.

Many jewellers are postponing purchases hoping the rupee could rise further and prices will correct, said a Mumbai-based dealer with a bullion importing bank.

In top hub China, premiums rose to about $12-14 an ounce over the benchmark from $6-8 last week.

Global benchmark spot gold slid to its lowest in more than two weeks, at $1,268.97, earlier this week, but has since firmed to above the $1,280 mark.

The dip in prices prompted some bargain hunting, said Samson Li, a Hong Kong-based precious metals analyst with Refinitiv GFMS.

“Total demand in China may remain down, as jewellery making constituted 65% of total market share, and demand is expected to be soft during Q2 and Q3. The only wild card is investment. If the local stock market does not pick up, I expect locals will continue to buy gold as a safe haven asset.”

Premiums in Hong Kong were unchanged at 60 cents to $1.30.

In Singapore, premiums of around 80 cents were charged.

“We have seen some pickup in demand, particularly on the wholesale side. Buyers will continue to come until there is a resolution to the trade war between U.S. and China,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.

Meanwhile in Japan, global trade uncertainties saw an influx of money into the Japanese yen, which like gold is seen as a safe-haven asset.

As a result, the “gold price on a Japanese yen basis has decreased, so at this moment investment demand is a little stimulated,” a Tokyo-based trader said, adding premiums in Japan eased to about 75 cents compared with last week’s level of $1.

“Though investment demand is up a little, because of the worldwide recessionary situation, industrial demand is not so strong at this moment. Therefore the premium was not dramatically high,” the trader added.

Reporting by Rajendra Jadhav in Mumbai, Arijit Bose and Diptendu Lahiri in Bengaluru; editing by Arpan Varghese and Susan Fenton

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