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Asian gold demand picks up, India slows down
By siliconindia staff writer
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Tuesday, 11 May 2004, 19:30 IST
SINGAPORE: Premiums for gold bars in Asia are at their highest this year as jewellery makers capitalise on falling outright prices to build up stocks, dealers said on Tuesday.
Gold bars in Hong Kong and Singapore were 40 US cents a kg over London physical prices, compared with 30 US cents last week. Premiums were also firmer in other trading centres such as South Korea and Malaysia.
"Premiums have gone up to 80 to 90 cents in Malaysia compared with 60 cents a few months back," said a dealer in Singapore, the entry point for much of the bullion trade in Southeast Asia.
"There's a shortage of kilobars. We can't get any stock," said the trader who mainly deals with Malaysia, which is one of the region's main gold jewellery makers.
Spot gold prices fell to $371 an ounce on Monday, its lowest since October, as funds abandoned the market due to a firmer dollar and growing expectations the United States will raise its official interest rates.
Spot gold was quoted at $379.10/379.60 an ounce at 0447 GMT, up from $378.40/379.15 in New York on Monday, but was well below a 15-year peak of $430.50 an ounce hit on January 6.
"Buying is good here," said Ellison Chu, a senior manager at Standard Bank London in Hong Kong.
"I think (demand) is partly from China because the price is too low," said Chu, adding jewellery makers in South Korea were also buying.
Fresh physical demand was also reported in the Middle East, where there appears to be shortage of bullion, said dealers.
Falling gold prices pushed up jewellery sales in Dubai this week and local dealers expected more demand in June when the Gulf city is due to launch promotions and vacation-bound expatriates buy presents.
Dubai is a regional centre for gold re-export and marketing. Around 70 per cent of the United Arab Emirates population of about four million are foreigners, mostly from the Indian subcontinent. Bullion analysts said physical demand would offer some price support for gold, but the outlook remained shaky.
"Higher US interest rates and a stronger dollar will limit gold's gains," said N M Rothschild in a report.
"Speculators will be wary to re-enter the market given the recent sharp falls in both the spot price and the gold equities. The $372 level will now provide support, with resistance at $380," it said.
While fresh physical demand had emerged across Asia, dealers said demand from the world's top buyer, India, would be weak in coming months since the wedding season is coming to an end.
"I would expect physical demand from India to sort of taper off because of the end of the festive purchasing season," said a dealer in Mumbai.
"Buyers are well-stocked. Traders reported a 40 per cent increase in sales during February-March-April period compared with the same period last year. Purchases around this period will be short-term opportunistic investment buying," he said.
Dealers said demand would pick up again from August and peak in November around Dipawali.