China trading volumes climb as global prices drop

By A. Ananthalakshmi

SINGAPORE (Reuters) - Trading volumes on the Shanghai Gold Exchange, the world's biggest physical gold platform, rose to a two-month high this week as global bullion prices fell towards a 3-1/2 year low.

On Thursday, 19.77 tonnes of 99.99 percent purity gold was traded on the exchange, the highest volume since October 8. Friday's volume as of 0837 GMT was 15.64 tonnes.

Physical demand got a boost as spot gold dropped towards a 2013 low of $1,180.71 an ounce hit in June, which is also the lowest since 2010, after the U.S. Federal Reserve's move to curb its $85 billion in monthly bond purchases.

Global stimulus measures, which burnish gold's appeal as a hedge against inflation, have fuelled a run-up in bullion prices in the past few years, with the metal hitting an all-time high of $1,920.30 in 2011.

However, trading volumes in Shanghai are still well below the year's peak of 43.27 tonnes, which was reached on April 22 after global prices plunged a whopping $208 over two sessions and unleashed pent-up demand.

"We haven't seen a surge in demand today like earlier this year," said Peter Fung, head of dealing at Hong Kong's Wing Fung Precious Metals.

"The market trend is still bearish. So people are not eager to buy anything at this level. I think they are also waiting to make big buys only next year," he said.

Premiums inched up slightly in Hong Kong to $1.80 an ounce after weeks of staying at $1.50. In Tokyo, premiums climbed to $1.50 an ounce from 50 cents overnight as demand picked up and the yen weakened.

In other regions such as Thailand and Indonesia, weakness in the regional currencies kept buyers away.

In India, premiums rose to $125 an ounce on Friday from $110 a day ago but were still below $160 quoted earlier this month.

To curb a rising trade deficit, India has slapped a record import duty of 10 percent on gold and tied imports for domestic consumption with exports, creating a supply crunch.

"We are getting a lot of orders from jewellers but we are unable to fulfill (due to the curbs). In December alone, we imported only one consignment of 1,250 kg," said an official with a state-run trading house importing gold.

Before the restrictions, the firm used to import four to five consignments each month, the official said.

(Additional reporting by Siddesh Mayenkar in Mumbai; Editing by Himani Sarkar)