This week, demand for physical gold decreased in India as customers put off purchases due to rising local prices, while premiums in the largest consumer were supported by a depreciating Chinese currency.
Up from the $3 premium the previous week, Indian dealers were now asking a premium of up to $4 per ounce over the official domestic prices, inclusive of the 15% import and 3% sales levies.
“Price fluctuation is perplexing customers. Many prospective purchasers are anticipating a price correction, according to a dealer with a private bullion importing bank in Mumbai.
Following a drop to 59,225 rupees last week, local gold prices were trading at roughly 60,200 rupees per 10 grammes on Friday.
Despite the government’s decision to withdraw notes having a face value of 2,000 rupees last week, there was a substantial decline in transactions involving these notes this week, according to a bullion dealer in Chennai.
Asia’s gold: India returns to premiums as buyers are attracted by lower prices
Premiums of $1.50 to $9 per ounce were levied over international benchmark spot prices in China, the world’s largest consumer of the precious metal, as opposed to a range of $2 to $6.50 last week.
According to Bernard Sin, regional director, Greater China at MKS PAMP, a depreciation of the RMB due to worries over a slowing Chinese economy might result in premium increases of $10 to $15.
This week, as a result of poor economic data, the value of the Chinese yuan against the dollar reached six-month lows.
Analysts, however, noted that domestic demand for safe-haven bullion was still rather moderate.
Before making physical purchases, consumers might wait for prices to drop much more, to around $1,850/oz or 416/gm of Chinese yuan, suggested Debajit Saha, lead metals analyst at LSEG.
Peter Fung, head of dealing at Wing Fung Precious Metals, observed a respectable amount of retail buying interest in Hong Kong, with bullion being sold at a premium of $2.50 to the market price.
Premiums in Singapore ranged from $1.50 to $2.50.
According to Brian Lan, managing director at dealer GoldSilver Central, people were selling gold bars and jewellery to make a profit and for liquidity.
Japanese merchants offered a premium of $0.50 when selling metal at parity with the market rate.
