Physical gold demand improved in India in the second half of this week as domestic prices slipped from a record high, though demand in other Asian regions was dented by a spike in global prices to their highest in nearly seven years.
Benchmark spot gold prices surged on Wednesday after Iran’s retaliatory attacks on U.S. troops in Iraq.
In top consumer China, premiums shot up to $7-$7.50 over the benchmark price, against $3.50-$4.50 the previous week, as investors rushed into the safety of the bullion amid concern over the potential for wider conflict in the Middle East.
“I think it’s more on speculative trading than any uptick in true physical demand,” said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.
Indian demand improved in the second half of the week after prices corrected from the record high of 41,293 rupees hit on Wednesday.
“Jewellers are making purchases for wedding season. Buying has become attractive after the price correction,” said Harshad Ajmera, proprietor of Kolkata wholesaler JJ Gold House.
Dealers in India were offering a discount of up to $7 an ounce to official domestic prices, compared with a discount of $13 last week. The domestic price includes a 12.5% import tax and 3% sales tax.
“The spike in prices surprised jewellers. They are buying to ensure they hold sufficient inventory in case prices rise further due to geopolitical factors,” said one Mumbai-based dealer at a private bullion-importing bank.
However, the price rally was brief and prices have retreated 4% from this week’s highs.
Traders in Japan and Singapore took profits as prices surpassed the $1,600 an ounce level for the first time since April 2013.
“We have seen a bit of festive buying but more selling because gold prices had shot up quite a bit,” said Brian Lan, managing director at Singapore dealer GoldSilver.
In Singapore, premiums fell to $0.50-$0.60 an ounce from last week’s $0.60-$0.80.
In Japan, gold was sold at a premium of about $0.50 an ounce, while premiums in Hong Kong stood at $0.30-$0.40, unchanged from last week.
Gold prices in Bangaldesh surged to a six-year high this week, with the best quality gold priced at 60,361 taka ($710) per Bhori, or 11.664 grams, the Bangladesh Jewellers Association said on Saturday.
