Singapore/Mumbai: Gold buying in India, the world’s largest bullion consumer, was lacklustre as a weak rupee marked up prices and deterred buying interest ahead of the festival season.
Gold premiums in Singapore and Hong Kong rose from a week earlier, as lower gold prices discouraged scrap selling while buyers stood on the sidelines as they waited for a clear direction.
“Festival demand is there but not as much as last year,” said Pinakin Vyas, assistant vice-president of IndusInd Bank, a gold importing bank in Mumbai.
“Anyone who wants to buy gold with a fixed budget of say Rs 100,000 will do so irrespective of what quantity they get.”
The rupee, which fell to its lowest level in two years on Tuesday, plays an important role in gold prices, as India relies on imported gold.
Dollar-denominated spot gold traded around $1,780 an ounce on Tuesday, down about 7% from its all-time high at $1,920.30 hit on 6 September.
Rupee-priced gold was last quoted at Rs 85,995.05 an ounce, only 3% below its record high above Rs 88,583.
Buying could pick up in the next few weeks if prices stabilise, ahead of the important Diwali and Dhanteras festivals in the last week of October and the wedding season that will continue till December.
PREMIUMS RISE IN HONG KONG, SINGAPORE
Premium for gold bars in Hong Kong was quoted in the rage of $1.20 to $1.50 an ounce above spot prices, up 30 cents from a week earlier. In Singapore, premiums also rose to as much as $1.20 an ounce.
“There is not much selling back,” said a Singapore-based dealer, “Buying has reduced from last week as people are adjusting their appetite to the price movement.”
“The first time prices dropped below $1,800, everyone went to buy. Now it seems that they can wait.”
Prices of gold bars in Tokyo were on par with spot prices, after being at a discount for three months, as lower prices curbed selling from the public.
“After gold prices dropped sharply last week, liquidation by the general public calmed down and some people have come in for fresh buying,” said a dealer at a large Tokyo-based bullion house.
Vietnam’s central bank has allowed several banks and gold companies to import about four tonnes of the metal while world prices are falling, a state-run newspaper said on Tuesday.
Investors will closely watch the unfolding debt crisis in the euro zone amid Standard & Poor’s downgrade of Italy’s credit rating and lingering fears of a Greek default.
Physical demand is likely to pick up in China ahead of a week-long public holiday at the beginning of October.
China’s gold demand could rise 10%, or 70 tonne, this year as consumers choose the metal as a form of wealth protection, said the World Gold Council.