Singapore: Purchases from India, the world’s largest gold consumer, have kept the physical market alive during the wedding season, but wild swings in bullion prices crimped demand in other parts of Asia.
The wedding season, when gold is often presented as a gift at marriages, will last until the end of May. The Akshaya Tritiya festival, considered auspicious to buy the yellow metal, on 7 May also spurred demand from jewellery makers.
“The coming festivals and the marriage season in India will most likely result in additional demand creeping into the market which could evade any major crash in gold from now on,” said Pradeep Unni, an analyst at Vision Commodities Services in Dubai.
Gold bars in a jewellery shop in Lucknow. Though the prices of gold are declining, it’s still trading above $900 an ounce
“Although there could be a marginal drop in prices in the coming sessions, it is unlikely to threaten the overall bull trend in gold as long at its stays above $885 (Rs35,400).”
Gold roared to a lifetime high of $1,030.80 an ounce on 17 March but then tumbled to a two-month low of $872.90 in early April in a broad commodities sell-off. It has bounced since then and stood around $928 an ounce on Tuesday.
Investors in Japan were still cashing in gold’s rise to record high, and some holders in Southeast Asia also turned sellers on fears that prices could fall further after the metal’s failure to revisit $950—a key resistance level.
Premiums for gold bars dipped to 70 US cents an ounce to the spot London prices in Singapore from 75 cents last week. The premiums have gone up more than 70% in Singapore since January, driven recently by buyback from jewellers.
“Premiums are still on the high side, but if demand starts to fall and the market is flooded with physical gold, then we will see lower premiums. But I think premiums will hold around 30 cents,” said a dealer in Singapore. “I must say there’s still some demand on the physical side but it’s not huge. People don’t want to make a wrong move,” he said.
Gold bars were offered at a discount of 25 cents to the spot London prices in Tokyo, unchanged from last week, with demand from the electronics sector offering limited support.
“It looks like demand from the investment sector is getting smaller and smaller. Basically people are just watching the market,” said a dealer at a bullion house in Tokyo.
“The general public is still selling gold, although they are not as aggressive as before.”
Gold has gained more than 20% in 2008 on speculative buying spurred by record-high oil prices that raised fears of inflation, and expectations of further interest rate cuts in the US, which reduced the dollar’s appeal.
“More demand is being noticed for lower-grade gold like 18K, or 16K due to the high prices,” said Unni of Vision Commodities.
“Though the quantity of gold purchased per person is low, the market is certainly far more active than first three months of this year when the prices soared past the $1,000 barrier.”