Asia gold sky-high prices take shine off Indian gold buying festival
Sun May 12 2024
Demand for physical gold was much lower than usual during a key festival in India, the world's second-biggest consumer, as near-record high prices deterred retail buyers and forced dealers to offer steep discounts.
Akshaya Tritiya, the second-biggest gold-buying festival after Dhanteras, was celebrated on Friday.
"Many consumers opted for token purchases of small denomination coins. Jewellery demand was very weak compared to last year," said a Mumbai-based jeweller, who said his sales during the festival amounted to only about two-thirds of the numbers seen last year. "We were not expecting demand to rise or match last year's level. But the drop in demand was far bigger than our expectations."
Domestic prices were trading around 72,700 rupees per 10 grams on Friday, not far from a record high of 73,958 rupees hit last month. Prices have risen more than 21 percent since the last Akshaya Tritiya festival.
"Retail buyers are struggling to swallow the recent price increases, which have badly affected their purchasing power,” said Prithviraj Kothari, president of the India Bullion and Jewellers Association.
Indian dealers offered discounts of up to $7 an ounce over official domestic prices - inclusive of 15% import and 3% sales levies - versus last week's $1 premium.
In top consumer China, dealers charged premiums of $26-$35 per ounce over benchmark spot prices , up from $18-$20 last week. "Demand is slightly muted as prices are quite high. If they fall to $2,250, people will buy on dips," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
In Japan, dealers sold gold at $0.5-$1 premiums. Traders said demand picked up slightly after the Golden Week holiday. In Singapore, and Hong Kong , gold was sold at anywhere between at par with the benchmark to $2.50 premiums.
Gold prices finished to their best week in five, with zero-yield bullion building on momentum fuelled by weaker U.S. jobs data this week that reinforced expectations for interest rate cut by the Federal Reserve. Spot gold rose 1 percent to $2,369.49 per ounce. US gold futures for June delivery settled 1.5 percentt higher to $2,375.00 per ounce.
The surge in gold buying is mostly technically driven, but last week's US payroll data and Thursday's initial unemployment claims data are lending support, said Phillip Streible, chief market strategist at Blue Line Futures.
"Concerns about the employment situation are oftentimes the first crack in the economy and could pull forward the Fed's first interest rate cut," Streible added. Financial markets expect the U.S. central bank to start easing its cycle in September. Lower interest rates generally tend to boost the appeal of bullion since it pays no interest.
Investors are now looking forward to the U.S. producer price index and consumer price index data due next week, both of which could significantly impact gold and silver prices. "If we get hot inflation or even warm inflation data next week, that's going to throw cold water on any notions that the Fed might be able to cut interest rates as soon as September," said Jim Wyckoff, senior market analyst with Kitco.
Source: https://www.thenews.com.pk/