Physical gold demand across major Asian markets remained notably weak this week, a direct consequence of pronounced volatility in international gold prices.
This instability created a climate of uncertainty that deterred potential buyers, who opted to postpone significant purchases in anticipation of a clearer price direction.
Specifically, the sharp fluctuations in spot gold rates made consumers hesitant to commit to high-value transactions, as they feared being exposed to a potential immediate loss should prices drop further.
The market tone was predominantly cautious, with activity limited mainly to essential or smaller-scale transactions, rather than the bulk buying that typically characterises a period of strong demand.
This wait-and-see approach from consumers underscores their sensitivity to price swings and their expectation for stable market conditions before re-entering the market in force.
Indian market
The discount offered by Indian dealers on gold narrowed this week, falling to a maximum of $21 per ounce against official domestic prices (which include a 6% import and 3% sales levy), according to a Reuters report.
This is a reduction from last week’s discount, which had reached a five-month high of up to $43.
On Friday, the domestic price for gold was approximately 122,500 rupees per 10 grams, representing a 4.3% decrease from the previous week’s price of 127,941 rupees, according to the report.
A Kolkata-based jeweller was quoted in the report:
After last week’s rally, prices started dipping this week, and it has thrown buyers off. Now everyone’s just waiting to see if they fall even more.
Despite the start of the wedding season, jewellers are experiencing weaker-than-normal demand, according to a Mumbai-based bullion dealer at a private bank.
This sluggish demand is attributed to the ongoing price rally, which is deterring buyers and consequently leading jewellers to hold off on building inventory.
Weddings are unequivocally a major, and perhaps the single largest, driver of gold consumption and purchases across India.
The deep-rooted cultural and traditional significance of gold makes bullion, predominantly in the form of exquisite jewellery, an indispensable element of the nuptial ceremony and celebrations.
China market
In China, the world’s leading consumer of gold, the price of physical gold varied from being equal to the global spot price to trading at a discount of up to $5 per ounce.
This indicates softer demand or an oversupply within the domestic Chinese market relative to international prices, a common fluctuation based on local market dynamics.
Peter Fung, head of dealing at Wing Fung Precious Metals, was quoted in the Reuters report:
People are still looking to buy gold as a long-term investment, but are hesitant to purchase at these price levels and are waiting for bigger correction to enter the market.
Customs data released on Thursday indicated that Swiss gold exports declined by approximately 11% in October compared to the previous month. This drop was attributed to high gold prices reducing demand from China.
Gold in Asia traded at varying premiums this week.
In Singapore, the premium ranged from $1.50 to $2.50. Hong Kong saw gold sold at par to a premium of $1.80. In Japan, bullion was available at par to a premium of $0.50 per ounce over spot prices.
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