Asian gold consumers use price rally to cash in on holdings

By Rajendra Jadhav and Vijaykumar Vedala

MUMBAI/BENGALURU (Reuters) - Consumers in Asia took profits on their gold holdings as a price rally last week helped bullion hit its highest in more than two years, keeping new buyers at bay despite jewellers offering steep discounts in second-top consumer India.

Gold has gained more than 25 percent so far this year and has been one of the top performing commodities.

As economic uncertainty over Britain's vote to leave the European Union rattled stocks, bonds and commodities, investors have flocked to safe-haven assets such as gold.

Bullion has risen over 6 percent post the Brexit vote on June 23.

"In Asia, when prices are high you see more selling, and more buying when prices are lower. I spoke to many refineries in Asia. That is what is happening," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.

"It is always like this in Asia, unlike Europe or America where investors chase the prices up."

Gold demand in the world's second biggest consumer India remained subdued despite a correction in prices, with dealers offering a discount up to $60 an ounce to the global spot benchmark this week, although it was down from last week's record discounts of up to $100.

"Retail demand is unlikely to pick up unless prices correct sharply... They are delaying purchases expecting prices to come below 30,000 rupees," said Daman Prakash Rathod, a director at MNC Bullion, a wholesaler in the southern Indian city of Chennai.

Local gold prices have fallen nearly 5 percent since hitting a peak of 32,455 rupees per 10 grams last week, its highest level in nearly three years.

"As soon as gold prices went above 30,000 rupees, investors started selling," said Kumar Jain, a Mumbai-based jeweller.

India's gold imports in 2016 are likely to fall to 600 tonnes, the lowest level since 2003 due to weak demand and rising scrap supplies.

Demand for new gold has been so weak in the past few months that India's imports over January-June halved from a year ago to 200 tonnes, data from consultancy Thomson Reuters GFMS shows.

Profit-taking was also seen in Japan as consumers sold, especially gold bars, a trader said. Prices were at a discount of about 75 cents this week in Japan, compared with a $0.5-$1 per ounce discount last week.

In top-consumer China, although gold demand improved slightly, higher prices deterred any major purchases.

Prices in China were seen at a premium of $1, versus a discount of $1-$2 per ounce last week.

"Gold buying is generally low in July. Demand may start to increase towards the end of August but a lot depends on the economy and the gold prices," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Premiums in Singapore were seen unchanged from last week at 60 cents, while Hong Kong prices were at a premium of 30-50 cents, versus a discount of $1 in the week before.

(Additional reporting by Koustav Samanta in Bengaluru; Editing by Biju Dwarakanath)