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Published
Aug 12, 2009
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Festive season revives gold demand, premiums steady

By
Reuters
Published
Aug 12, 2009

SINGAPORE/MUMBAI (Reuters) - Gold trading picked up in India, the world's largest consumer, as jewellers took advantage of a price drop to replenish stocks during the festive season, while premiums for kilobars were mostly steady in Asia in the past week.



Spot gold at $946.20 an ounce on Wednesday 12 August was around 2 percent below a 2-month high of $971.25 an ounce hit last week, and well below an 11-month high above $1,000 struck in February.

India, which accounted for more than 20 percent of global demand for gold jewellery in 2008, celebrates the Hindu festivals of Raksha Bandhan, Janmasthami and Ganesh Chaturthi in August. The festive season peaks in October with the Hindu festival of light, or Deepavali.

"In the last two months people have been coming to buy. The jewellery fair was good," said Jignesh Shah, proprietor of Lucky Jewellery, referring to the India International Jewellery Show in Mumbai that ended on Monday 10 August.

"People came from all over India and this time they were showing more interest in gold jewellery rather than diamond ones," he added.

Weddings usually take place during the festive season, when parents give gold jewellery to their daughters for financial security. Jewellery is the most common gift during religious events in India and forms an essential part of the dowry basket.

"Demand is okay. Daily we are selling 50 to 75 kgs. Premiums are at 0.50 cents to $1 depending on the overseas supplier. These won't rise -- not unless spot prices fall massively and evoke demand," said a dealer at a bank in Mumbai.

Premiums were steady at 70 U.S. cents an ounce to the spot London prices in Singapore but dealers said regional buyers such as Indonesia could be waiting for a further correction before entering the physical market to stock up. .

Demand for gold jewellery normally picks up in Indonesia, the world's largest Muslim nation, ahead of the Ramadan fasting month later in August which culminates with the Eid al-Fitr celebration.

"The markets are a bit lacklustre now and traders are probably focused on the key interest rate decision later tonight for more direction," said Adrian Koh, analyst at Phillip Futures in Singapore.

"Gold is very much trading within a band of $920-$980. I guess what we do have to note is the dollar starting to dislocate from the risk aversion trade, and any continued strength in the dollar could eventually weigh on gold."

The U.S. Federal Reserve will conclude its two-day policy meeting and release a statement around 1815 GMT, with investors looking to its assessment of the economy and whether it unwinds some of the unconventional easing measures currently in place.

Premiums for gold bars were barely changed in Hong Kong at 20 to 30 U.S. cents to the spot London prices, but the discount narrowed in Tokyo after cash gold dropped from recent highs.

"There's a little of discount of 25 cents but it's summer holidays in Japan and trading volumes are very thin," said a dealer in Tokyo.

Gold bars were offered at a discount of 50 cents last week.

By Lewa Pardomuan and Ruchira Singh

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