India in mood to buy gold on lower prices, jewellery demand
Source: BI-ME and Reuters , Author: BI-ME staff
Posted: Mon April 28, 2008 12:00 am

INTERNATIONAL. Jewellers took advantage of a drop in gold prices to stock up, with main consumer India abuzz with activity during the wedding season and ahead of a religious festival, dealers have said.

In other parts of Asia, the bullion trading cities of Hong Kong and Singapore noted steady buying from jewellers in Indonesia, Thailand and Vietnam. Dealers in the Middle East also reported physical buying, albeit limited.

Gold had hit a record US$1,032.70 an ounce in London on 17 March, four days after the yellow metal broke through US$1,000 for the first time.

On the London Bullion Market, gold dropped back to US$891.50 per ounce at Friday’s late fixing from US$908.75 a week earlier.

“Since the market traded back below US$950, it seems like for the last two, three weeks, the demand in Asia is quite good,” said Ellison Chu, Senior Manager at Standard Bank London in Hong Kong.

In addition to purchases from jewellers, the market also saw demand from investors, said Chu, who quoted gold bars at a premium of between 10 to 20 US cents to the spot London prices, steady from last week.
A drop in bullion’s prices stirred up trading in India during the wedding season, when gold jewellery is presented as a gift at Hindu marriages. The Akshaya Tritiya festival due on 7 May has also attracted buying from jewellers, said dealers.

Akshaya Tritiya, South India’s biggest gold buying festival, is an auspicious day when purchases of precious metals are believed to bring lasting prosperity.

“This could have a positive impact on prices and could also boost physical purchases in India and Middle East. The demand has been better after gold slipped back below US$950,” said Pradeep Unni, Analyst at Vision Commodities Services in Dubai.

Although price volatility and the prospect of more declines in prices affected trading in Dubai, purchases from physical buyers were still evident, said Unni.

“The steady demand from committed consumers is very much in existence and that is helping the physical market,” he said.

Dubai is a long-established market for bullion as well as wholesale and retail jewellery. Trade has traditionally benefited from demand from the Arab world and proximity to India.

In Singapore, a centre for bullion trading in Southeast Asia, premiums for gold bars were steady at 60 US cents an ounce but some dealers expected the value to rise to 75 cents soon, a level last seen two weeks ago, due to better demand.

“There’s a good increase in physical demand. Definitely demand is getting better, especially from Indonesia,” said a dealer in Singapore, referring to Southeast Asia’s main buyer. “It looks like people are looking for a slide in prices to around US$880,” he said.

Gold has gained on speculative buying spurred by record high oil prices that raise fears of inflation and expectations of further interest rate cuts in the US, which has reduced the dollar’s appeal.

But gold’s attempts to revisit a lifetime high have been met by profit-taking, prompting disappointed investors to liquidate some of their holdings. Spot gold prices have risen by a third in the past year alone.

 

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