SINGAPORE/MUMBAI (Reuters) - Premiums for gold bars edged up on Tuesday after bullion prices slipped from an all time high, while purchases by the electronics sector helped stir up trade in an otherwise slow physical market. Top consumer India saw sales of scrap subside although domestic prices were within sight of record levels. India is entering the lean season for gold deals as the annual monsoon rains sweep the country.
The onset of monsoon typically crimps gold demand in India as rural households, which account for 65 percent of total gold buying, slows as farmers use funds to buy seeds and fertiliser.
Gold bars were offered at a premium of 70 U.S. cents an ounce to the spot London prices in Singapore, up from 50 cents last week but dealers still saw some selling from consumers in Southeast Asia.
“It’s a kind of one-sided trade. There’s moderate selling from bullion dealers, jewellers and speculators but I am not sure from which country,” said a dealer in Singapore, who also sells gold to India. “We did see some light physical buying yesterday.”
Gold firmed to around $1,222 an ounce, but was still around 2.3 percent below a lifetime high of $1,251.20 hit last week. Gold has rallied on worries the European sovereign debt crisis is spreading and the U.S. economy may be slowing.
Gains in the international market curbed demand in India, especially after prices on the Multi Commodity Exchange soared to an all-time high of 19,198 rupees ($411.18) per 10 grams last week.
Despite high prices, some jewellers kept their holdings, waiting for local prices to revisit the highs before releasing their stocks. Scrap dealers also bought less, with demand for jewellery slowing down during the monsoon.
“Scrap purchases have fallen by about 25 percent. We end up collecting three kilogrammes on an average (on a daily basis) as against four kilogrammes in February,” said Jitendra Kantilal, a partner with Jugraj Kantilal, a scrap dealer in Mumbai’s Zaveri bazaar, or gold market.
“People are more informed now through television and newspapers. They want a price of 20,000 rupees for their scrap,” said Kantilal, who offered to buy scrap at 18,800 rupees per 10 grams.
Households in India are estimated to have 20,000 tonnes of gold mainly in the form of jewellery, according to trade estimates, some of which they sell during price surges.
In East Asia, premiums bounced to 40 cents to the spot London prices in Hong Kong from 10 cents last week, but gold bars slipped to a discount in Tokyo as purchases from the electronics sector failed to offset selling from retail investors.
“I would say demand from the electronics sector is steady but interest from the investment side is limited. Overall the market is silent. Maybe because everybody is watching the World Cup,” said a dealer in Tokyo.
Gold bars were offered at a discount of 25 cents, having been quoted on par with the London prices last week.
(Editing by Ed Lane)