SINGAPORE/MUMBAI (Reuters) - China returned to the physical gold markets strongly on Friday after a week-long break as banks and retailers looked to restock inventory following strong sales during the Lunar New Year holiday.
The Chinese New Year, celebrated on January 31, typically prompts a spurt in bullion purchases as the precious metal is bought for good fortune and given as gifts.
The Friday increase in premiums and trading volumes on the Shanghai Gold Exchange, a physical platform, shows that jewellery and bullion sales during the new year holiday period were robust in the world’s biggest gold consumer.
“Things were quiet this week till China came back today,” said one dealer in Hong Kong. “But what we saw today was pent-up purchases, so we cannot say for sure the same pace will last.”
Shanghai premiums for 99.99 percent purity gold climbed to $11 an ounce over London prices. They were about $4 last Thursday just before China went on holiday. Trading volumes hit their highest in a month.
Caishikou, one of the biggest jewellery retailers and dealers in Beijing, sold jewellery worth about 250 million yuan in the first two days of the new year, according to data available on its website.
Gold and silver jewellery was popular among consumers for new year purchases, the Beijing Municipal Commission of Commerce said in a statement on its website.
Horse-themed gold jewellery and bullion of smaller weights were favoured by customers to welcome the Year of the Horse, it said.
Gold premiums in India, the second biggest gold consumer, fell to $70-75 an ounce, compared to $80 last week, on higher availability of imported finished jewellery and smuggled goods.
India has put in place measures to dissuade gold buying to tackle a high trade deficit, including a 10 percent import tax and a requirement that a fifth of all imports be shipped out. The scarcity of the metal has in turn boosted smuggling.
Smuggled gold was available at a premium of $65 an ounce, trade body officials said.
“People prefer to buy smuggled gold as premiums are lower,” said Harshad Ajmera, director, All India Gems and Jewellery Trade Federation, which represents more than 300,000 jewellers.
Some retail buyers are in a wait-and-watch mode, eyeing the next policy moves by the government, traders said.
The finance ministry has said it will review the curbs on gold imports by the end of March.
Premiums across rest of Asia were largely stable.
Editing by Sunil Nair