Singapore: Sale of scrap gold from Indonesia has picked up this week as jewellers cash in on bullion’s rise but India, the world’s main consumer, shows buying interest ahead of the busy wedding season in April.
In other parts of Asia, sales of gold bars from Japanese retail investors have slowed to a trickle as they regained confidence in the precious metal which has been battered by a sell-off in equities.
Cash gold rallied to its highest level in nearly three weeks at $664.60 (Rs29,260) an ounce on Thursday on firmer crude oil and as the dollar fell after the US Federal Reserve held interest rates steady at 5.25%.
Despite sales from Southeast Asia’s main buyer, Indonesia, gold bars stayed at a premium of 10 US cents an ounce to the spot London price in Singapore, a centre for bullion trading in the region
“I definitely expect more scrap from Indonesia to come in if it goes to $670. But I don’t think the sales will cut the premiums because we still see light buying from India,” said a dealer in Singapore.
The wedding season and the gold-buying festival of Akshaya Trithiai begin in April in India, where gold is seen as an auspicious metal and buying increases during festivals and wedding seasons.
Gold jewellery is the most common gift during religious events and forms an essential part of the dowry basket.
“There seems to be a reasonable demand at the lowest levels, buying on the dips,” said Darren Heathcote of Investec Australia in Sydney.
“It’s all lining up to a better picture for gold. It’s going to encourage investors to take a plunge,” said Heathcote, who expects gold to trade in a range of $660 to $670 before trying new highs again.
Gold can be bought as a hedge against inflation and for future sale when holders need money in times of trouble. A weaker dollar also boosts gold’s appeal as an alternative investment.
The metal has gained more than 5% since hitting a six-week low of $632.30 on 6 March, when a sell-off in global stocks and a surging yen forced risk-averse investors to sell gold to cover losses.
Premiums for gold bars rebounded to 50 US cents an ounce to the spot London price in Tokyo from zero last week as selling subsided and investors begun returning to bullion houses.
“We’ve seen huge selling from the general public and gold bars have been sold at a discount. But selling interest has dropped,” said a dealer at a bullion house in Tokyo.
Renewed interest from investors could offset a decline in purchases from the electronic sector ahead of the end of the fiscal year at the end of March, said dealers.
“Gold is following stocks. Overall bullish sentiment in the long term has not changed, but the rise in gold will be very gradual,” said a senior trader at a Japanese trading house.
The Nikkei was up 256.00 points at 17,419.20, the highest close since 1 March.
Purchases from Japanese investors helped gold reach multi-year highs in 2006, when it rallied to a 26-year high of $730 an ounce in mid-May.
Newmont Mining Corp.’s South American chief said in Lima on Wednesday, he saw a “great possibility” that gold prices will be steady or rise considerably higher in the second half of the year due to strong Asian demand and the dollar’s weakness.
Premiums were unchanged at between zero to 20 US cents an ounce in Hong Kong, a key bullion trading centre in East Asia.