Higher gold prices keep Asian buyers at bay

Gold demand in Asia remained sluggish this week as higher prices continued to deter physical traders from making fresh purchases, with discounts in India widening to a record high.

Bullion registered its biggest monthly gain since February in June, on the back of safe-haven buying spurred by political and economic concerns following Britain's vote to leave the European Union last week.

The yellow metal, often perceived as a hedge against economic and financial uncertainty, has risen more than 25 percent this year and is on track to log its biggest yearly gain since 2010.

"We don't see much uptick in demand for physical gold in Asia," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central, adding that people were more interested in selling than buying because of higher prices.

"This is what we see in Asia where people buy more gold only when the prices are lower."

Physical gold demand in top consumer China remained subdued as consumers preferred to stay on the sidelines with bullion turning dearer after Brexit.

"Prices need to be around USD1,240-USD1,260 for people to buy physical gold," said William Wong, assistant head of dealing for Wing Fung's precious metals desk.

Bullion prices in China were seen at a discount of USD1-USD2 per ounce to the global spot benchmark, which has been rallying for five weeks. Prices were at a premium of USD1 last week.

Meanwhile, in India, the world's second largest consumer, dealers were offering a discount of up to USD47 an ounce as consumers shied away from making new purchases. Discounts rose to a record high of USD57 an ounce on Monday, compared with USD30 to USD55 Last week.

"Consumers are postponing buying expecting a correction in prices. Even after offering steep discounts they are not ready to make purchases," said Ghanshyam Nichani, owner of Dhanraj Jewellers in Mumbai.

Gold prices hit the highest since Sept. 9, 2013 at 31,925 rupees per 10 gram last week.

"Jewellers are not making purchases due to volatility in the rupee and overseas gold prices. They are waiting for prices to stabilise," said a Mumbai-based dealer with a private bank.

Among other major trading centres in Asia, premiums in Singapore were seen at 60 cents, compared with 60-80 cents last week, while Hong Kong prices were at a discount of USD1-USD2 this week, versus a USD1 discount the week before.

In Tokyo, prices continued to remain flat compared with the global benchmark as consumers waited for prices to come down.