Demand for gold in Asia was muted this week as the bullion's rebound in prices curbed purchases, with discounts in India widening to the highest in more than five months.
Spot gold hit a seven-month peak earlier this week, primarily boosted by safe-haven demand stemming from political uncertainties in the United States and Europe.
"Gold markets in Asia have been quiet... The rise in price did encourage destocking in some markets, but purchases have been slow," said Cameron Alexander, an analyst said.
Dealers in India, the second-biggest gold consumer, were offering a discount of up to $3.5 an ounce this week over official domestic prices, the highest since the last week of December.
Last week, they were offering a discount of $1 an ounce. The domestic price includes a 10 percent import tax.
"Demand is very weak. Traditionally, business comes down in June and now with the price rise, gold is trading in discount," said Mukul Sonawala, proprietor of wholesaler Narrondass Manordass in Mumbai.
India's gold imports in May surged four-fold from a year ago to 103 tonnes as jewellers increased purchases to replenish inventory and stock up ahead of a new national sales tax, provisional data from Thomson Reuters' consultancy GFMS showed.
"For the next few weeks, market will trade in discount. In the supply chain, almost everyone is carrying higher stocks than the demand," said a Mumbai-based dealer with a private bank.
On Saturday, India said it will tax gold at a rate of 3 percent under the new tax, which was lower than industry expectations of around 5 percent.
The impact of the new goods and services tax (GST) in India is likely to be less severe as the lower-than-expected tax rate may encourage a higher level of imports than what was anticipated earlier in the second-half of this year, Alexander said
Demand in top consumer China remained weak with premiums dipping to $4-$6 per ounce this week versus $7 last week.
In Singapore, gold was being sold at a premium of $1, nearly flat from previous week, while Hong Kong premiums ranged between 40 cents to $1, compared with 60 cents to $1 an ounce last week, traders said.
"On the retail side (in Singapore), there's more selling at this point because prices are high. People who trade physical hope to buy when prices come down again," said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.
Prices in Tokyo were quoted at a discount of 25 cents-50 cents, unchanged from last week.
Published Date: Jun 09, 2017 08:25 am | Updated Date: Jun 09, 2017 08:25 am