Singapore/Mumbai: India’s gold purchases picked up as the festive season gained steam in the world’s largest consumer but the physical market also saw sales of scraps after prices bounced from a 1-week low, dealers said on Tuesday.
Demand from jewellers at lower levels helped offset sales from holders in Indonesia and Malaysia and kept premiums for gold bars steady at 60 to 70 US cents an ounce to the spot London prices in Singapore.
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Gold was more than 1% below last week’s 18-month high of $1,023.85 an ounce after a failure to break last year’s record around $1,030 triggered disappointed selling and profit taking.
“Demand will be there (ahead) but prices have to be stable. Demand was very good yesterday when gold fell below $1,000 an ounce,” said Ajay Singh, proprietor of Kiran Jewellers, a wholesaler in Jaipur in the western state of Rajasthan.
“People will pick up gold at around $1,000 levels or even a little above that, provided market doesn’t get volatile.” Gold rose $6 to $1,008.55 an ounce on Tuesday, having fallen to a 1-week low $995.50 on Monday as a rally in the dollar spurred sales. Gold has gone up 14% this year on worries the global economic recovery was not sustainable.
India is in the midst of the festival season, which peaks in October with Diwali. Weddings take place during the festive season but gold’s rally to $1,000 level, which first started in February, had cut imports.
Dealers said consumers in India may have to buy gold before prices go up again as jewellery forms an essential part of the dowry baskets. The South Asian nation accounted for more than 20% of global jewellery demand last year.
“We’ve always seen that some buying does happen irrespective of the level of price. It’s just the quantum that changes more often than not,” said Darren Heathcote, head of trading at Investec Australia in Sydney.
Gold bar premiums edged up to 40 cents to the spot London prices from 20 cents last week in Hong Kong after bullion’s drop from multi-months highs ignited buying from jewellers and the electronics sector.
“Even at $1,000, customers still fill up their stocks right now,” said Dick Poon, manager of precious metals at Heraeus in Hong Kong. “We are still bullish for gold. At the end of this year, we’ll see another record high.”
Back in India, premiums were steady are between 60 and 80 US cents an ounce. The World Gold Council’s January to June figures show India’s gold imports fell 55% to 126.7 tonnes from 282.3 tonnes a year earlier.
“Yesterday when gold fell below $1,000 demand was good and there were lots of inquiries even though we were closed for a religious holiday,” said a dealer at a bank in Mumbai.
“Any correction below $1,000 will draw good buying. If it falls to $980-$990, there will be very heavy buying,” said the dealer, referring to levels seen earlier this month.
Local dealers said they were hoping prices will stabilise so that the biggest of festivals—Dussera next week and Dhanteras and Diwali next month draws good sales.