Indian retail gold buyers pile in as prices slide to one-year low

Retail consumers in India continued to buy up physical gold this week as prices retreated to a near one-year low, while lower rates also injected fresh activity in other hubs, especially Singapore.

Dealers charged up to $5 an ounce over official domestic prices, inclusive of 12.5% import and 3% sales levies, compared with last week’s premium of $4.

“Demand has significantly improved in the past few days. Retail buyers are making purchases, especially for weddings,” said Mangesh Devi, a jeweller based in Satara in the western state of Maharashtra.

On Friday, local gold futures fell to 44,217 rupees per 10 grams, a trough since April 7.

Jewellers were also making healthy purchases in the first half of the week, but now a few of them have paused expecting further fall in prices, said a Mumbai-based dealer with a bullion importing bank.

“Jewellers don’t want to get stuck with high cost inventory,” the dealer said.

In Singapore, premiums of $1.60-$2 an ounce were charged, with strong demand arising from low local prices.

“We’ve seen an increase in demand, in particular from retail clients, for both gold and silver, as prices have come down a bit,” said Brian Lan, managing director at dealer GoldSilver Central, adding that wholesalers are also covering their short positions.

Chinese customers were charged premiums of about $6-$7 an ounce over benchmark spot gold prices, unchanged from last week as demand was stable, but not high, dealers said.

In Hong Kong, dealers sold bullion at anywhere between a discount of $3 and a premium of $2 relative to the benchmark. Japanese dealers charged a premium of $0.50.

A sharp dip in domestic rates has triggered relatively strong investment demand, a trader at Tokyo-based retailer Tokuriki Honten said.

“Individual investors are seeing current price level as a good buying opportunity,” the trader added.

Indian shares fall: Indian shares fell for a second straight session on Friday over worries around rising US Treasury yields and outflows of foreign funds, with losses dominated by financial and IT stocks.

The NSE Nifty 50 index fell 0.95% to 14,938.1 and the S&P BSE Sensex dropped 0.87% to 50,405.32.

The blue-chip indexes still finished the week more than 2.5% higher, thanks to positive economic growth data and progress in the country’s COVID-19 vaccination campaign.

Asian and European shares slid following a weaker close on Wall Street overnight as US Federal Reserve Chair Jerome Powell disappointed investors by not indicating that the Fed might step up purchases of long-term bonds to hold down longer-term interest rates. Gaurav Garg, head of research at CapitalVia Global Research, said rising US bond yields were strengthening chances that foreign investors may pull out some money from emerging markets like India.

Foreign investors had sold a net $308.7 million worth of Indian equities this week up to Thursday, Refinitiv data showed. Heavy buying by these investors in previous months had driven Indian equities to record highs.

Private-sector lenders ICICI Bank and HDFC Bank were the biggest drags on the Nifty 50, declining 1.8% and 1.4%, respectively. The Nifty Bank index lost 1.6%.

Wipro Ltd slid 4.1% after announcing it would buy British consultancy Capco for $1.45 billion, a deal it said would be dilutive to earnings in the first year. Analysts also warned that integration challenges and future impairments could stem from the deal.

Oil and Natural Gas Corp was among the few Nifty companies that gained, advancing 2% on the back of rising oil prices.

Agrochemical maker Heranba Industries Ltd ended up nearly 30% in its market debut following a strong investor response to its $85 million initial public offering last month.

Separately, India, the world’s third-biggest oil importer and consumer, on Friday said the decision by major producers to continue with output cuts as prices move higher could threaten the consumption led-recovery in some countries.

The Organization of the Petroleum Exporting Countries (Opec) and its allies, a group known as Opec+, agreed on Thursday not to increase supply in April as they await a more substantial recovery in demand amid the coronavirus pandemic. Crude prices rose after announcement and are up 33% this year.

Brent crude futures for May on Friday rose nearly 1%, to $67.44 a barrel, and are on track for a near 2% gain this week.

“As one of the largest crude-consuming countries, India is concerned that such actions by producing countries have the potential to undermine consumption-led recovery and more so hurt consumers, especially in our price-sensitive market,” Minister for Petroleum and Natural Gas Dharmendra Pradhan told Reuters.