Asia Gold-India discounts widest in 10 months, China premiums dip
Singapore (Aug 4) Gold discounts in India widened to their highest in over 10 months and premiums in other major Asian centres edged lower on the back of sluggish demand across markets due to rallying global prices.
In India, dealers were offering bullion imported from South Korea without paying custom duty at lower prices prompting higher than usual imports from the country, traders said.
"Due to the free trade agreement signed with South Korea, importers don't need to pay import duty for gold imported from that country. That's why importers could offer huge discount," said Ashok Jain, proprietor of Mumbai-based wholesaler Chenaji Narsinghji.
Dealers in India were offering a discount of up to $11 an ounce this week over official domestic prices, the highest since Sept. 24, 2016. Last week they were offering a discount of $4. The domestic price includes a 10 percent import tax.
"Retail demand is subdued. It will remain weak in the first half of August unless prices correct sharply," said a Mumbai-based dealer with a private bank.
India's gold imports will likely drop in the second-half of the year from the first six months after jewellers rushed to stock up ahead of new taxes introduced on July 1, the World Gold Council (WGC) said on Thursday. Gold demand is expected to remain subdued in India for a few weeks as "consumers who have recently purchased are unlikely to do so again in the short term", the WGC said.
In China, the world's biggest consumer, premiums were lower, ranging between $4 and $7 an ounce. Premiums offered last week ranged from $5 to $10.
Despite falling premiums, higher prices have been driving away physical demand for the yellow metal, according to Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
Gold prices held steady near seven week highs hit earlier this week, on track to end the week almost unchanged. In Hong Kong, premiums were between 50 and 70 cents, the same as the previous week.
"For demand to come back up again, gold needs to return to the $1,220 level," said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.
Premiums in Singapore ranged between 60 and 80 cents, down from between 70 cents and a dollar last week.
Demand in Japan was lower this week and is expected to fall further next week as markets enter summer holiday season in the region, according to a Tokyo-based trader.
In Tokyo, gold was being sold flat this week, down from between flat and a 25 cent premium during the week before.
Reuters
