In India, the demand for physical gold experienced a slight increase this week, even as prices rebounded.
This uptick in demand was primarily driven by jewellers replenishing their inventories in anticipation of the upcoming festive season, Reuters said in a report.
This contrasts with the generally subdued activity observed in other markets, highlighting a unique seasonal surge in the Indian gold market.
In the Indian market, gold dealers recently faced a significant shift in pricing dynamics.
They were charged a premium of up to $4 per ounce over the official domestic prices.
This premium included a 6% import levy and an additional 3% sales tax, bringing the total additional cost to 9%.
This current pricing stands in stark contrast to the previous week’s offers, which saw a much wider range, from a $2 discount to a $3 premium.
Rising festival demand
The transition from a potential discount to a consistent premium highlights a tightening supply or increased demand within the Indian gold market.
This upward pressure on prices for dealers could ultimately translate into higher costs for consumers, impacting overall gold consumption in the region.
A Chennai-based bullion dealer was quoted in the report:
Jewellers were sitting on the sidelines for weeks, but with prices refusing to correct much, they’ve now started buying for the upcoming festive season.
The upcoming Dussehra and Diwali festivals, both highly significant cultural events in India, are slated for October this year.
These festivals are traditionally considered exceptionally auspicious times for purchasing gold, a practice deeply rooted in Hindu mythology and cultural beliefs.
The act of buying gold during these periods is believed to bring prosperity, good fortune, and ward off negative energies, making it a powerful ritual for many households across the country.
On Friday, domestic gold prices hovered around 102,000 rupees per 10 grams, slightly below the record high of 102,250 rupees reached earlier in the month.
“Gold’s been stuck around 100,000 rupees for three months now, and shoppers are finally getting used to it – they’re slowly coming back to the market,” a Mumbai-based bullion dealer with a private bank told Reuters.
Asian markets
In mainland China, a key consumer market for gold, bullion was observed trading at a price level consistent with, or slightly above, the global benchmark spot price.
Specifically, the premium ranged from par (no premium) to a maximum of $5 per ounce over the international spot price, according to the report.
This pricing dynamic indicates a relatively stable demand environment compared to the previous week, when dealers were charging significantly higher premiums, typically between $3 and $8 per ounce.
The reduction in the premium suggests a potential easing of immediate demand pressures or an increase in available supply within the Chinese market.
“Volume in Shanghai Gold Exchange has been lacklustre, with only light participation from speculators and retail investors,” Bernard Sin, regional director of Greater China at MKS PAMP was quoted in the report.
“Volume in Shanghai Gold Exchange has been lacklustre, with only light participation from speculators and retail investors,” Bernard Sin, regional director of Greater China at MKS PAMP was quoted in the report.
Gold in RMB terms remains at high levels, and with no clear catalyst to buy, there has been little follow-through demand. The absence of new import quotas has further dampened physical flows.
Meanwhile, gold sold at par in Hong Kong and Japan, with a Tokyo-based trader noting that Japanese bullion traded at par with spot prices. In Singapore, gold was sold at a premium of $2.50.
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