Demand tepid but price dip likely to ignite interest

By Vijaykumar Vedala and Sethuraman N R

BENGALURU (Reuters) - Gold demand in Asia continued to underwhelm this week, but a dip in global prices over the past couple of weeks raised expectations of buying in the coming days alongside keeping a lid on selling by consumers.

The safe-haven asset, which has risen over 25 percent so far this year and has been one of the top-performing commodities, is on course for its second straight weekly decline after falling over 2 percent last week.

"As long as prices are coming down, most investors in Asia will look towards gold. I expect to see a bit more buying as compared to what we have seen in the previous month or so, when people were selling," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.

Consumer demand in India, the world's second biggest consumer, remained sluggish but was expected to get a boost as the country gears up for the festival season that begins next month.

Dealers were offering a discount up to $40 per ounce to the global spot benchmark, down from last week's discounts of up to $60.

"Next month, we are expecting some improvement in retail demand due to weddings and festivals," said Aditya Pethe, a director at Waman Hari Pethe Jewellers in Mumbai.

Gold prices in India have fallen nearly 5 percent since hitting a peak of 32,455 rupees ($483.6) per 10 grams earlier this month, the highest level in nearly three years.

The December quarter usually accounts for about a third of India's gold sales as it takes in the start of the wedding season as well as festivals like Dhanteras and Diwali, when buying gold is considered auspicious.

Physical demand in top-consumer China remained weak, with the metal staying flat against the global spot this week, compared with a premium of $1 previously.

"Prices have to come down by another $50 to see a pickup in demand. But selling of gold by consumers might come down if the prices remain low in the coming week," said a gold refinery manager based in Hong Kong.

Buyback volumes were on the rise in Japan as investors indulged in profit taking, even as the bullion was available at a discount of $1 versus a discount of 75 cents last week, a Tokyo-based trader said.

Premiums in Singapore were unchanged from last week at 60 cents, while Hong Kong prices were at a discount of 30-80 cents, versus a premium of 30-50 cents the week before.

($1 = 67.1100 Indian rupees)

(Reporting by Vijaykumar Vedala and Sethuraman N R; Additional reporting by Rajendra Jadhav in Mumbai; Editing by Gopakumar Warrier)