Falling price of gold lifts up buying in India; premiums touch eight-month high

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A gold jewellery shop in Mumbai's Jhaveri Bazaar. Photo/IAC

Demand for physical gold  in India has been surging as local prices have dropped to their lowest levels since June last year. Gold buying is also expected to pick up in other Asian centres after the Chinese Lunar New Year holiday week.

In India, dealers were charging a premium of up to $7 an ounce over official domestic prices, the highest in eight months. Last week they were charging a premium of up to $5 inclusive of 12.5% import and 3% sales levies.

People are buying coins, bars and jewellery because of price correction. On Friday last, local gold futures fell to Rs 45,861 per 10 grams, the lowest level since June 2020. Supplies are limited but demand is robust from jewellers, who are keen to build inventory for the festival and wedding season. 

Gold demand in China, the world’s biggest bullion consumer, is expected to rise after the Chinese New Year celebrations.

Bullion prices pared the previous week’s gains witnessing selling on risk-on sentiments. Gold prices also declined with rise in US bond yield and strong equity indices boosted by positive economic data. Bullion price halted six days decline as prices reversed from support levels on inflation hedge and $1.9 trillion stimulus hopes. US Federal Reserve balance sheet rose to a fresh record high of $7.512 trillion, a $124 billion sequential uptick and highest since May.

Commodity bullion prices have been trading volatile during the week passed by with bullion prices ended lower while crude oil halted recent rally falling back to below $60 per barrel. Base metals traded strong with Copper soaring to nine years high on supply deficit and higher demand optimism. Demand for physical silver has also outstripped production, as refiners cannot shift production overnight. Premiums on silver products are also going up exponentially.

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