India gold demand subdued on higher prices, China premiums hold firm

Gold demand in India was muted this week, as a price recovery prompted potential buyers to postpone purchases, while ​China premiums remained steady on safe-haven demand.

Spot gold prices have ​risen over 2 per cent so far this week on easing fears of inflation and ‌higher interest rates, as investors remained optimistic about a US-Iran peace deal. 

Gold prices in India were trading around ₹1,52,600 ($1,614.05) per 10 grams on Friday, having risen 57 per cent in a year.

Dealers in India quoted discounts of up to $15 an ounce and premiums of $6 an ounce over official domestic prices this week, inclusive of 6 per cent import and 3 per cent sales levies, compared with discounts of up to $5 and premiums of $9 last week.

 

"Retail demand is not picking up even though the wedding season is underway. Higher prices are severely affecting purchases," said a Hyderabad-based jeweller.

Weddings are a major driver of gold purchases in ‌India, with bullion in the form of jewellery forming a crucial part of a bride's attire and a popular gift from family and guests.

At the same time, India's April gold imports are set to fall to a near 30-year low of around 15 metric tons, industry and government sources said, because banks have been hit by an unexpected tax demand.

In top consumer China, bullion traded at premiums of $14 to $20 an ounce over ​the global benchmark price, largely in line with last week's premiums of $16 to $20.

Markets in China were closed ‌for holidays from May 1 to 5, reducing trading activity.

Steady premiums mean "that even with gold (prices) higher, people still want to buy some gold for investment and safe-haven, ​as ‌they are still concerned about the uncertainty in the Middle East and also inflation," said Peter ‌Fung, head of dealing at Wing Fung Precious Metals.

China's central bank loaded up on gold for an 18th straight month in April, data from the People's Bank of ‌China ​showed on Thursday.

In ​Hong Kong, gold traded at a discount of $0.50 to premiums of $2, while in Japan, gold was sold at discounts of $0.50 to $5.50.

In Singapore, gold was sold at ‌discounts of $1 to ​premiums of $3.50.