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Asian gold demand stays tepid; Indian discount widens to record |
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MUMBAI: Gold demand in Asia remained subdued this week as buyers were sceptical about the sustainability of the recent price rally, with the Indian market falling to record discounts as consumers postponed purchases in expectation of a cut in the import tax.
Asian buyers have curbed purchases since mid-January as spot gold prices have spiked to a one-year high amid a tumble in global stocks that stoked demand for the safe-haven metal.
"Physical markets are quite weak. It's not just India or China, its across the region," said a Singapore-based bullion dealer with an international bank.
Prices in China, the No. 1 consumer, slipped to a discount early this week before recovering to $2 an ounce premium on Friday, slightly higher than parity to global prices a week ago.
Data on Thursday showed China's net gold imports via main conduit Hong Kong slumped to a 17-month low in January, as heavy purchases made in the previous months and higher bullion prices curbed demand.
The Chinese have sold into gold's recent rally, along with other Asian consumers who decided to take profits from higher prices.
In India, the world's second-biggest consumer, discounts surged to a record of $53 an ounce to the global spot benchmark this week, widening from the $50 discount offered last week, dealers said.
"Expectations of duty cut in the budget have slowed down trading," Daman Prakash Rathod, a director at MNC Bullion, a wholesaler in the southern Indian city of Chennai.
Indian dealers were expecting up to a 4 percent reduction in the gold import duty in the annual budget, which will be presented on February 29.
India imposed a record-high duty of 10 percent in 2013, but instead of curbing imports, the duty revived smuggling networks that brought an estimated 175 tonnes of gold into India in 2014 or about a fifth of total annual arrivals.
"Before the budget, trading houses want to clear inventory. They have nearly stopped imports," said a Mumbai-based dealer with a private bank.
India's overseas gold purchases are likely to fall to a more than two-year low in February, industry sources said this week.
Premiums in other major trading centres Hong Kong and Singapore were unchanged from last week..
"A recovery in China demand and the possibility of a reduction in the gold import tariff when the Indian budget is presented next week could also aid demand and prices," HSBC analyst James Steel said in a note.
Source : economictimes.indiatimes.com
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