Gold buying tepid in Asia; dealers await demand pick-up in final quarter

Premiums in top consumer China edged lower this week, while prices in India remained at deep discounts

Gold buying interest was tepid in Asia as prices headed for a second week of gains, with dealers awaiting a pick-up in demand in the seasonally strong fourth quarter.

Premiums in top consumer China edged lower this week, while prices in second biggest buyer India remained at deep discounts.

Spot gold rose to a one-month high of $1,156.30 an ounce earlier this week, before paring some of those gains. As of 0812 GMT on Friday, gold was headed for a 0.3 percent gain for the week.

"Demand has been largely steady from China and the premiums are still relatively healthy despite the rise in prices," said a bullion dealer.

Premiums on the Shanghai Gold Exchange started off the week at $4-$5 an ounce, but edged lower to around $2, as demand eased with higher prices.

China's peak season for gold demand kicks off next week with the National Day holiday, lasting until Lunar New Year early next year.

The week-long holiday beginning on Oct. 1, also known as the Golden Week, is a time when millions of people travel and spend more than usual, boosting retail sales. It also marks a pick-up in weddings, triggering demand for gold jewellery.

Banks and jewellers have stocked up in anticipation of strong demand from next week, the bullion dealer said.

Data on Thursday showed China's gold imports from main conduit Hong Kong rose to a three-month high in August, in a sign of strong appetite ahead of the holiday.

Elsewhere, Indian prices remained at a discount of about $6-$8 an ounce to the global benchmark.

Poor monsoon rainfall has raised concerns over rural demand, which accounts for two-thirds of India's total gold demand, while robust imports in recent months have also kept a cap on fresh purchases.

"Jewellers made healthy purchases last month. Now they are cautious," said a Mumbai-based dealer with a bank.

"General perception among them is prices will fall further. So they are waiting for the correction."

Dealers in India were looking forward to the final quarter, when gold is bought during the festivals of Diwali and Dussehra.

"Retail demand is largely steady compared to last week. It could rise in coming months due to festivals and lower prices," said Samir Sagar, director of Mumbai-based Manubhai Jewellers.

In other key Asian trading centres, Singapore and Hong Kong, gold prices were unchanged at a premium of around $1 an ounce. In Tokyo, prices were flat to a discount of 25 cents.