Gold price dip lures some Indian buyers as festival approaches

Gold discounts in India narrowed to a four-month low this week as some consumers took advantage of a modest dip in domestic prices to buy bullion ahead of a festival next week, while other Asian hubs saw limited activity.

Dealers offered discounts of up to $8 an ounce on official domestic prices this week, the lowest since mid-June. They were offering a discount of $20 last week. The domestic price includes a 12.5% import tax and 3% sales tax.

Gold futures in India were trading around 38,050 rupees per 10 grams on Friday, having hit a record high 39,885 rupees last month. Prices are up more than 21% so far in 2019.

“Demand has been improving slowly due to Diwali, but still, jewellers are on the sidelines,” said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.

Gold is considered an intrinsic part of festivals and weddings in India and is a popular gift.

Usually jewellers build inventory ahead of Diwali, but this year, they’re have not made big purchases after witnessing poor sales during the Dussehra festival earlier this month, a Mumbai-based dealer with a private bullion importing bank said.

India’s gold imports plunged 68% year-on-year in September to their lowest in over three years as record domestic prices curbed retail buying.

Demand looked grim in other Asian hubs as high prices and an economic slowdown exacerbated by a US-China trade war soured consumer appetite.

While global benchmark prices were on track to mark a small weekly decline, moving in an $1,476.65-$1,497.74 an ounce range, they have climbed about 16% so far this year.

In top consumer China, bullion was sold at a premium of $4.75-$5.25 per ounce, down from last week’s $5-$8 range.

The Chinese economy is being hurt by the trade war and gold is too expensive for people to buy, said Ronald Leung, chief dealer at Lee Cheong Gold Dealers.

China’s third-quarter economic growth slowed to its weakest pace in almost three decades.

In Hong Kong, which has been hit by political protests and the resultant damage to tourism and retail sales, premiums of $0.45-$0.55 were being charged versus $0.50-$1.30 last week.

Premiums in Singapore were at $0.50-$0.60 an ounce, compared with last week’s $0.50-$0.80, with high prices likely to keep demand subdued, traders said.

“I don’t think the festive season will give demand for physical gold much of a boost as prices are still quite high,” a Singapore-based trader said adding, if the local currency doesn’t strengthen, demand would stay muted.

Gold in Japan was sold at par with the benchmark, a Tokyo-based trader said, as bullion priced in Japanese yen was at elevated levels.

Meanwhile, gold fell on Friday after a Brexit deal was struck by Britain and the European Union, though losses were limited by weak economic data from the United States and China.

Spot Gold was down 0.2% at $1,489.02 an ounce at 1143 GMT US Gold futures fell 0.4% to $1,492.50.

The European Union backed a new Brexit deal with Britain on Thursday, more than three years after Britons voted in a referendum to leave the bloc.

“The focus is on Brexit. The risk of a no deal Brexit has dropped and overall the sentiment on the Brexit front has improved a lot, but now it’s just the uncertainty of the vote,” said ABN Amro analyst Georgette Boele.

Prime Minister Boris Johnson now faces a Brexit showdown with parliament on Saturday. “If the Brexit deal goes through, there will be a bit of pressure on Gold, because there are a few investors who bought Gold on the Brexit story,” Boele said.

Gold denominated in sterling hovered close to a near three-month low hit on Thursday.

Meanwhile, China’s third-quarter economic growth slowed more than expected to its weakest pace in almost three decades.

This came after US data showed retail sales falling for the first time in seven months in September, suggesting that manufacturing weakness could be spreading to the broader economy, while industrial output for last month also dipped.

“Economic data out of US and China are in favour of further (monetary policy) easing that will be supportive for Gold,” said SP Angel analyst Sergey Raevskiy.

The US Federal Reserve is set to meet at the end of the month to decide on further interest rate cuts this year. Palladium fell 0.1% to $1,757.07 an ounce, a day after hitting a record high of $1,783.21. The autocatalyst metal was up 3.4% on the week and on course for its biggest gain since the week ended Sept. 13.

Agencies