Gold’s drop to a four-month low this week attracted buyers in Asia but dealers were doubtful the demand would last as consumers may be waiting for the market to go even lower. Spot gold fell to $1,240.69 an ounce on Wednesday, its lowest since early July, on fears the US Federal Reserve could soon begin rolling back its stimulus measures. The metal has been trading below $1,300 an ounce for nearly two weeks but demand has failed to pick up much, as Asian consumers bought a lot at the time of earlier price drops this year.
The absence of strong physical buying might put gold prices under even more pressure. “Demand has picked up but not in a way that we expected. Consumers are waiting for (prices) to go down further and are holding off big purchases,” said one Singapore-based dealer. In India, despite muted demand, premiums jumped to $120 an ounce from $80 last week because of a supply crunch caused by government restrictions on imports.
“There is a problem with supply and premiums are very high again at $120, as whatever little was imported has been exhausted,” said Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation. To ease its trade deficit, India has made it more expensive to bring in gold by setting the import duty at a record high 10 per cent. It has also tied the quantity of imports to exports, making it necessary for importing agencies to fulfill export orders before sending any bullion for local consumption.
The wedding season is under way in India and will continue until January. Gold is an essential part of Indian weddings as it carries a lot of cultural value. “We are doing shipments for exports as well as domestic users under the new rule, and our sales are down by about 60 percent compared to last year,” said an official with a bullion-importing private bank.
“Consumers will have to get used to high premiums,” he said.
Source: Reuters
Source:Bullion Bulletin