Chinese gold purchases pick up ahead of Lunar New Year

SINGAPORE/MUMBAI (Reuters) - Demand for gold in top consumer China rose this week as banks and retailers stocked up for the upcoming Lunar New Year holiday, pushing up local premiums.

Chinese premiums, as seen on the Shanghai Gold Exchange, the platform for all physical trade in the mainland, rose to a high of $7 an ounce this week compared with about $4 late last month.

The buying from China has helped the global bullion price stay above $1,200 an ounce, traders said.

"We saw consistently strong buying this week," said a trader in Shanghai. "Premiums and volumes are better than what we saw in the last month."

The strong purchases are likely to continue until the New Year holiday in February, he said.

The increase in Chinese buying came despite higher gold prices, which is a good sign for the market, analysts said.

"Physical demand from China remains robust even at these lofty levels, with seasonal demand into Chinese New Year likely to provide support, or at the very least a cushion to any downside swings," Alex Thorndike, senior precious metals dealer at MKS Group, said this week.

In India, local prices were either on par with or at a discount of up to $3 an ounce to the global price this week due to weak demand and adequate supplies, dealers said.

"Indian gold is expected to continue to remain in discount in the short term because demand is dull. We don't expect much buying in the wedding season beginning from Jan. 15," said Prithviraj Kothari, executive director of India Bullion & Jewellers' Association.

The world's second-biggest bullion buyer scrapped a rule late last month mandating traders to export 20 percent of all gold imported into the country.

Some in the market had been expecting it to tighten the curbs, so dealers had stocked up in previous months, with imports probably higher than 100 tonnes for a third straight month in November.

Kothari said imports had now fallen, expecting between 45 and 50 tonnes in January.

Premiums in other key trading hubs Singapore and Hong Kong remained largely steady, while Tokyo prices were at a discount.

(Reporting by A. Ananthalakshmi in Singapore and Meenakshi Sharma in Mumbai; Editing by Alan Raybould)