Record high gold prices add to post-festival lull in India demand

By Rajendra Jadhav and Harshit Verma

(Reuters) – Physical gold dealers in India were forced to offer steeper discounts this week as record high prices accelerated a post-festival slowdown in demand, with the rise in local prices hurting activity in other Asian hubs as well.

Indian dealers offered discounts of up to $9 an ounce over official domestic prices — inclusive of 15% import and 3% sales levies — up from the last week’s discounts of $6.

Demand was good for a few days after the Diwali festival last month, but rising prices have brought the market to a standstill, a New Delhi-based bullion dealer said.

Local gold prices hit a record high of 62,675 rupees per 10 grams this week, and have risen more than 11% in two months.

“Buyers are grappling with the sudden surge in prices. They are waiting to see whether prices will sustain at these levels,” a Mumbai-based dealer with a bullion importing bank said.

In top gold consumer China, dealers charged premiums of $25-$35 per ounce over global spot prices, which were hovering near a seven-month peak, versus the $20-$40 premiums last week. [GOL/]

However, “the absence of new import quotas, the Federal Reserve’s interest rate trajectory, and escalating geopolitical and economic risks collectively suggest a positive trend for the gold premium in the coming year,” said Bernard Sin, regional director of Greater China at MKS PAMP.

Hong Kong dealers charged $1.00-$2.00 per ounce premiums. In Singapore, premiums rose slightly to $1.25- $3..

“We are noticing a slowdown in buying activity (in Singapore) with retailers more willing to sell than buy at this level. Dealers’ inventory remains more or less the same week on week,” Hugo Pascal, precious metals trader at InProved said.

In Japan, gold changed hands at anywhere between a $1 discount to $0.5 premium over global spot rates this week.

(Reporting by Harshit Verma, Anjana Anil in Bengaluru and Rajendra Jadhav in Mumbai, additional reporting by Brijesh Patel; editing by Arpan Varghese and Mrigank Dhaniwala)