ALSO READIndia gold premiums drop on subdued demand; China premiums hit near 3-year high Asian gold consumers use price rally to cash in on holdings December gold imports to halve as cash crunch squeezes demand Gold buying picks up ahead of festive season in India, China India gold premiums jump, bargain hunting props up China demand
By Sethuraman N R and Rajendra Jadhav
BENGALURU/MUMBAI (Reuters) - Gold premiums in China held near three-year highs this week amid limited supply of the precious metal with traders saying Beijing was restricting imports, while prices in India swung to a discount as a severe cash crunch dampened appetite.
The import curbs may be part of China's efforts to limit outflows of the yuan after the currency's slide to its weakest in more than eight years, traders say. China allows only 15 banks to import gold, including three foreign lenders.
"There is severe restriction on the banks' quota to import gold into China. Each one of them have to justify their need," a Hong Kong-based banker said.
"Supply has been limited and so the premiums have held firm," said Cameron Alexander, analyst with Thomson Reuters-owned metals consultancy GFMS.
Spot gold recovered from its lowest since February to trade at $1,175 an ounce on Friday, but was still on track for a fourth consecutive weekly decline. [GOL/]
Dealers offered a discount of up to $4 an ounce this week over official domestic prices that include a 10 percent import tax, compared with a premium of up to $3 last Friday.
"Wedding season is going on, but demand is 70-80 percent lower than last year," said Fatechand Ranka, a jeweller based at Pune in western state of Maharashtra. "Consumers don't have currency notes to buy gold."
Last month, Prime Minister Narendra Modi scrapped 500 and 1,000 rupee banknotes, or 86 percent of the value of cash in circulation, in a crackdown on corruption, tax evasion and militant financing.
Indian jewellers rely on the wedding season for sales during winter months after the end of key festivals such as Diwali. Weddings account for more than half of the country's annual demand for gold, according to GFMS.
"Prices are attractive, but most jewellers are not buying, expecting a further fall in global prices if the Federal Reserve raises interest rates," said a Mumbai-based dealer with a private bank.
In Hong Kong and Singapore sellers offered premiums of between 80 cents and $1.20 an ounce. Discounts in Tokyo widened to 50 cents this week from flat last week.
(Additional reporting by Swati Verma in Bengaluru; Editing by Manolo Serapio Jr.)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)