Asia Gold: Price drop offers little cheer on hopes for further falls
Physical gold demand picked up slightly in most Asian hubs this week as a drop in prices spurred some interest, but failed to stoke significant demand as buyers awaited steeper dips.
Global benchmark spot gold prices fell to a near one-month low of $1,483.90 an ounce earlier this week, after hitting an over six-year high of $1,557 last week.
“We are seeing some physical buying from wholesalers mainly. A pick up, not much. I think the prices aren’t enticing yet at this point of time,” said Brian Lan, managing director at Singapore dealer GoldSilver Central.
People are waiting for prices to fall to around $1,460 to buy, he added.
A correction to prices in India, the second largest gold consumer, failed to boost retail purchases this week even as gold discounts widened to the highest level in over three years.
Dealers were offering a discount of up to $51 an ounce over official domestic prices this week, the highest since August 2016. Last week they were offering discounts of up to $45. The domestic price includes a 12.5% import tax and 3% sales tax.
Gold futures were trading around 37,820 rupees per 10 grams after hitting a record high of 39,885 rupees last week.
Weak retail demand has discouraged jewellers from stocking up, a dealer at a private bullion-importing bank in Mumbai said.
“If prices correct below 37,000 rupees, jewellers could start making purchases for festive season,” the dealer said.
Demand for gold usually strengthens in the final quarter as India gears up for the wedding season and festivals such as Diwali and Dussehra, when buying gold is considered auspicious.
In top hub China, bullion was sold at a premium of about $8-$11 an ounce over benchmark prices, compared to $9-$10 last week. Premiums were around 50 cents to $1 range in Hong Kong, little changed from last week.
The Chinese economy has slowed and tourists are not coming to Hong Kong, so people are in no mood to spend money, said Ronald Leung, chief dealer at Lee Cheong Gold Dealers.
The long-running and at times violent street protests in Hong Kong are helping tarnish its lustre as the main physical gateway for gold to China.
Meanwhile, in Singapore, premiums were quoted in the 50-80 cents an ounce range versus last week’s 60-80 cents.
In Japan, gold was sold at an about 50 cent discount from a 75 cent discount last week, a Tokyo-based trader said.
(By Eileen Soreng, Brijesh Patel and Rajendra Jadhav; Editing by David Evans)