Gold demand remained tepid in Asia this week as a slight uptick from India and Japan was offset by muted response in other trading centres while buyers expected prices to decline further.
Bullion, which has gained about 14 percent this year, has taken a beating over the past month due to a surging dollar and improving prospects for a sooner-than-expected U.S. interest rate hike, which might happen this month or in July.
“There hasn’t been much movement in the physical aspect of gold with investors preferring to watch from the sidelines because they are expecting a rate hike,” said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.
Gold discounts in India, the world’s second-largest consumer, narrowed this week as the recent price correction attracted retail buyers. However, demand is expected to be lean over the next few weeks in the absence of any major seasonal gold buying events.
“Retail demand has slightly improved from price-sensitive consumers. But demand will remain weak in the next few weeks as the wedding season is nearly over and we do not have any major festival in the near future,” said Kumar Jain, vice-president, Mumbai Jewellers Association.
Dealers were offering a discount up to $14 an ounce to the global spot benchmark this week, down from last week’s $19 discount. Gold prices in India fell about 5.5 percent in May.
The rural demand, which accounts for nearly two-thirds of the country’s gold purchases, is expected to decrease as farmers generally spend on seeds and fertilizers for summer-sown crops just before monsoon arrives in June.
In Japan, lower gold prices combined with a stronger yen attracted consumers, bargain hunters as well as the industrial sector.
Prices in Tokyo ranged from nearly flat to a premium of 10 cents as compared with a discount of 25 cents last week.
Meanwhile, demand in top-consumer China continued to be muted with the premium remaining around $3 an ounce, down a dollar from last week. A holiday on account of the dragon boat festival is likely to keep Chinese buyers away next week as well.
Premiums in Singapore were quoted at 50-80 cents an ounce, nearly unchanged from last week, while those in Hong Kong were seen at $1 as against $1-2 last week.