Indian gold premiums fall to 5-month low ahead of elections
Asian bullion consumers were cautious about this week`s rally in prices, buying only on dips and selling at higher prices to make a profit.
Singapore/Mumbai: Asian bullion consumers were cautious about this week`s rally in prices, buying only on dips and selling at higher prices to make a profit.
Premiums across Asia were either stable or lower from last week`s levels as gold prices rallied almost 2 percent for the week.
Gold was trading near a four-month high of USD 1,354.80 on and looked poised to log its fifth straight week of gains as a weaker dollar and geopolitical tensions in Ukraine boosted its safe-haven status.
"It has been a mixed week," said one Singapore-based bullion dealer. "People are selling at USD 1,350 and above but came back to buy at around USD 1,330."
A retailer in Singapore said buying has dropped off since prices broke through USD 1,320 and that consumers were selling scrap.
In China, the world`s biggest gold consumer, domestic prices were at a discount to spot prices on soft demand. Physical demand has fallen off sharply in China since the Lunar New Year holiday in late January.
"Consumers had bought more than necessary last year when prices fell sharply so now when prices are higher, they are holding back," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
"There is a small amount of selling in China as well."
Gold prices fell 28 percent last year as funds moved money to higher-yielding stocks and the U.S. Federal Reserve began unwinding its massive stimulus measures.
Gold premiums in India, the second biggest consumer, fell further to their lowest level in five months on lack of demand ahead of national elections set to begin next month.
Premiums to London prices fell to USD 60 an ounce, a level last seen in early October, compared with USD 80.
They hit a record of USD 160 in December because of government efforts to discourage gold demand, including a record high import duty of 10 percent.
Dealers said demand was quiet due to fewer weddings ahead of the Holi festival, considered to be an inauspicious period for new beginnings.
Also having an impact is the election code of conduct, according to which people are not allowed to carry more than 50,000 rupees in cash without proper documentation.
"Cash movement will be less till May due to the election code of conduct, so people will hold on to cash and no unnecessary jewellery purchases will happen," said Bachhraj Bamalwa, director with All India Gems and Jewellery Trade Federation.