Gold scrap sales surge on price rally, no buying from India

Singapore: Rallying gold prices triggered a wave of scrap sales in Asia’s physical gold market, as traders took advantage of three-month high prices, while buying from top two consumers India and China remained muted.

Spot gold hit a three-month high of $1,781.40 an ounce on Wednesday, rising for a third day in a row on factors including agreement on Greece’s bailout and hopes on further monetary easing.

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“It’s all about scrap business,” said Singapore-based dealer, adding that Indonesia has been selling while China was quiet.

“Chinese banks are stuck with more than sufficient physical stocks and we don’t see any buying,” he added. China does not allow exports of gold.

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Thailand witnessed a mix of buying and selling. A five-month high bhat boosted the purchasing power of Thailand-based traders earlier in the week, while higher prices prompted selling to lock in profits.

In Singapore, gold bar premiums stood in the range of 70 cents to $1 an ounce, dealers said.

Physical dealers attributed the recent rally to rising investment interest, which offset the lukewarm demand on the physical bullion market.

“At this price level, most buying is from funds and investors, and there is very little buying on the physical side,” said a Hong Kong-based dealer.

Dealers quoted gold bar premiums in Hong Kong in a range of 80 cents to $1.50 above London prices, steady from last week.

China’s gold demand has eased since the Lunar New Year celebrations last month, while multi-week high gold prices dampened interest in India, the world’s top gold consumer.

Easing inflation and a revival in stock markets could dent gold imports by India, pushing shipments down by about 35 percent in value terms in 2012/13, a government panel said on Wednesday.

In Japan, scrap sales also increased on the rising prices, causing the discount on gold bars to widen to as much as $1 an ounce below London prices.

Eyes will be on the injection of three-year low-rate funding by the European Central Bank on Feb 29, in a second long-term refinancing operation (LTRO) allotment.

Expectations of further monetary easing by central banks around the world could boost gold’s appeal.

Reuters