Singapore / Mumbai: Last-minute purchases from India, the world’s main gold consumer, stirred up the physical market on Thursday as consumers shrugged off rising prices ahead of the peak of the festive season.

Sales of scrap also slowed to a trickle as investors expected gold to rise further on worries the US Federal Reserve’s move to buy more government debt would do more harm than good, keeping premiums steady in Singapore and Hong Kong.

Cash gold rose $9.05 an ounce to $1,356.2 an ounce, tracking a rally in US gold futures. Cash gold struck a record around $1,387 last month.

India’s festival demand peaks with Dhanteras on Wednesday and the Diwali festival of lights on Friday. Weddings also take place during the season, and gold jewellery is an essential part of the dowry basket that Indian parents give their daughters at weddings for security.

“Sales would double for Dhanteras this year. So far the sales have been super-duper through the year. They have doubled in 2-3 years as rising prices have reinforced trust," said Darshan Zaveri, director at Manubhai Zaveri Ornaments, an Ahmedabad-based wholesaler and retailer.

“They now feel prices would move to Rs22,000."

Indian gold futures rose 1.01% to Rs19,666 per 10 grams on Thursday, not far from the all-time high of Rs20,028 hit on 14 October. A Reuters poll showed prices could touch Rs20,000 by the end of June 2011.

“It looks the market is going to swing in a wider range but we’ve seen physical offtake from Thailand," said a physical dealer in Singapore. “India is still buying today, although I think it is slowing down."

Premiums for gold bars were steady at 70 US cents an ounce to spot London prices in Singapore, partly due to demand from India, where local dealers also reported a growing interest in coins and bars as a form of investment.

Premiums were steady in Hong Kong at as high as $1 an ounce despite firmer bullion prices.

“It’s interesting this time. There’s not much scrap sold back into the market," said Dick Poon, manager at Heraeus in Hong Kong, adding that dealers also noted purchases from jewellers.

“Everybody needs to import to fulfil customer order."


Demand from India was expected to slow down next week, but jewellers in other parts of Asia could buy more gold bars to meet pre-Christmas order. A strong baht could also spur more buying from Thailand, said dealers.

“Thai people are more inclined to buy gold than to sell. Indonesia has been very quiet in the last few days, so you can’t really tell much about their interest although I do export gold there," said the dealer in Singapore.