Festive demand boosts gold purchases in India, Singapore

Gold demand was robust in India and Singapore this week as a correction in prices ahead of a key gold-buying festival boosted purchases even as major centres like China and Japan were closed for most of the week due to holidays.

Gold demand spiked in India as a fall in prices to the lowest level in more than four months boosted retail purchases.

“Jewellers are aggressively buying as retail demand has improved due to falling prices,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.

Local gold futures fell to 31,250 rupees per 10 grams on Thursday, the lowest since December 21.

Retail demand is likely to remain robust in May due to wedding season and Akshaya Tritiya festival that will be celebrated on May 7, Ajmera said.

Gold is an essential part of a bride’s dowry in India and also a popular gift from family and guests at weddings.

In India, dealers were charging a premium of up to $2 an ounce over official domestic prices this week, unchanged from last week. The domestic price includes a 10 per cent import tax and a 3 per cent sales tax.

India’s gold demand is expected to rise in the June quarter from a year ago due to a higher number of auspicious days for weddings and a fall in local prices ahead of a key festival, the World Gold Council said on Thursday.

Gold smugglers in India have slowed their operations over worries their shipments will be caught up in seizures of cash, bullion, booze and drugs that are aimed at controlling vote-buying in the country’s national elections.

Meanwhile, comparatively lower prices this week supported demand in other Asian centres as well, with premiums in Singapore staying around $1 an ounce, unchanged from last week.

Spot gold is down about 1.1 per cent so far this week.

“As the price level came down we saw an increased demand from retail, and especially wholesalers as Akshaya Tritiya is coming up. Prices are now in favour of buyers this year ahead of the festival unlike last few years,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.

In Hong Kong, premiums were mostly unchanged at 60 cents-$1.20 with a slight uptick in retail demand due to the fall in prices.

Premiums in Shanghai fell to around $11 early in the week from $14-$18 an ounce last week. China’s financial markets are closed from Wednesday, May 1, through Friday, May 3, for the Labour Day holiday.

Due to the 10-day Golden Week holiday, banks and industries remained closed in Japan this week and bullion buying was muted, a Tokyo-based trader said.

Meanwhile, gold was steady on Friday as the market awaited US non-farm payrolls data but was headed for its biggest weekly decline since the end of March, as the dollar gained after the US central bank doused expectations of a near-term rate cut.

Spot gold was steady at $1,270.59 per ounce, as of 1144 GMT. In the previous session, the metal dropped to $1,265.85, its lowest since the end of December.

US gold futures were also flat at $1,271.60 an ounce.

gold has fallen more than 1 percent in the last two sessions and is down over 1 per cent this week after the US Federal Reserve emphasised it saw no compelling reason to consider a rate cut any time soon.

“People expected the next move from the Fed to be a rate cut but it doesn’t look like there would be a rate cut anytime soon and the risk of another hike on the table increased after his statement,” Quantitative Commodity Research analyst Peter Fertig said.

“(Right now) people are holding back and are waiting for the US non-farm payrolls data ... the dollar is heading higher which is negative for the precious metals complex.”

Better-than-expected non-farm payrolls data tends to boost the dollar, as it would reinforce the economy’s strength, and weigh on gold, analysts said.

Economists polled by Reuters are expecting total non-farm employment to have increased by 185,000 jobs in April.

The dollar was up about 0.2 per cent against key rivals and was on track to post its third straight session of gains.

Market participants were also keeping a close watch on US-China trade talks, anticipating a resolution to the year long tariff war between the world’s two largest economies.

A trade deal would boost investors appetite for riskier assets and dent bullion’s safe-haven appeal.

Reflecting investor sentiment towards bullion, holdings in the world’s largest gold-backed exchange-traded fund (ETF), SPDR gold Trust, fell about 0.2 per cent to 745.52 tonnes on Thursday, its lowest since Oct. 12.

Reuters