Indian customers welcome dip in local prices

Gold demand in India improved this week as a drop in domestic prices to a more than two-week low allowed dealers to reduce discounts, while volumes were sombre in other Asian centres.

Local gold prices in India fell to 51,436 rupees per 10 grams on Friday, the lowest since Aug. 3.

”Retail demand was good this week. Jewellers were also making purchases because of the price correction,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.

Dealers offered a discount of up to $4 an ounce over official domestic prices this week, inclusive of the 15% import and 3% sales levies, down from last week’s discount of $14.

Investment demand for gold was weak as many traders are moving towards silver, said a Mumbai-based dealer with a private bank.

”Persistently lower gold and silver prices, as the U.S. dollar remained strong, have been a positive driver of global physical and retail bullion demand this week,” said Nicky Shiels, Head of Metals Strategy at MKS PAMP.

Chinese premiums were almost unchanged at $5-$8 an ounce over international spot prices.

So long as the near-term $1,750-$1,800 range holds… physical demand should remain decent, Shiels said.

Hong Kong saw gold sold between flat to $2 premiums, unchanged from last week, with one dealer describing activity as ’sluggish’.

Also seeing relatively quiet demand was Singapore, where premiums of $1.50-$2.30 were charged, consistent with the previous week.

Dealers in Japan sold the metal between at par to $0.50 over the benchmark.

”Japanese retail investors are likely to buy dips but the trading volume is smaller than usual,” a Tokyo-based trader said.

”We are in the middle of summer holiday season and the real action will be seen from next week.”