Gold price drop fails to boost demand; premiums hold firm

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold demand across Asia was subdued this week, with premiums in major trading centres failing to see any uptick, despite a drop in the metal's prices to a 2-1/2-week low as the strength in the dollar and equities kept consumers away.

Spot gold prices fell to $1,180.55 an ounce this week, their lowest since May 11, before recovering slightly. They are on track for their second straight weekly decline.

But the price slide was offset by a stronger dollar, making gold more expensive for holders of other currencies.

The greenback rallied to a 13-year high against the yen this week, and to its highest in a month against basket of major currencies.

"People are still happy to trade the stock market, rather than gold," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

"Unless the dollar slides sharply, we won't see any pick up in demand in the near term," he said.

Demand for gold jewellery, bars and coins tends to be typically muted during the summer months.

A tight trading range for the metal's price over the last few weeks have also kept investors away.

Gold prices have struggled to break out of a $1,170-$1,230 an ounce range since mid-March, hamstrung by uncertainty over the timing of a U.S. rate rise.

Premiums in Hong Kong were unchanged this week at 80 cents to $1 an ounce over the global benchmark, while in Singapore they remained steady at around $1 an ounce.

In China too, prices held up firm at $1.50-$2 over the global price. China was the top consumer of gold in the first quarter of the year, and the second biggest after India last year.

In Tokyo, prices continued to remain at a discount of 25 cents to 50 cents an ounce due to the softness in yen.

"Any further weakness in the yen will trigger selling of gold as consumers will start taking profits," said a trader in Tokyo.

In India, demand was hurt due to the lack of weddings and festivals.

"Consumer demand for the next two to three months will be very slow," said Bachhraj Bamalwa, director at All India Gems and Jewellery Trade Federation. "We could see more interest if prices drop drastically."

Indian prices were largely on par with global prices or at a premium of $1, traders said.

(Reporting by A. Ananthalakshmi; Editing by Michael Perry)