India gold discounts hit 2-month high on price surge, soft demand

Mumbai/Bengaluru - Jewellers postponing purchases, unsure whether prices can be sustained at higher levels

Gold discounts in India widened to a two-month high this week as prices surged to a more than six-month peak and demand remained subdued due to New Year holidays.
Benchmark spot prices for the precious metal were headed for a third straight weekly gain due to concerns over a slowdown in global economic growth, and tumultuous stock markets.
Dealers in India were offering a discount of up to $6 an ounce over official domestic prices this week, up from a discount of $2 last week. The domestic price includes a 10 per cent import tax.
"In physical market demand is negligible. Retail consumers are not comfortable with higher prices," said Chanda Venkatesh, managing director of CapsGold, a bullion merchant based in the southern city of Hyderabad.
Local gold prices earlier this week jumped to their highest in three weeks following overseas markets, although a stronger rupee capped the upside.
In some parts of the country, retail demand was subdued due to Khar Mass, Venkatesh said.
Khar Mass is a month in the Hindu calendar from December 16 to January 14 which is considered inauspicious and people avoid weddings, buying gold or property during the period.
"Jewellers were postponing purchases. They are not sure whether prices will sustain at the higher level," said a Mumbai-based dealer with a bullion importing bank.
In China, the world's leading gold buyer, demand remained low for most of the week. Premiums slightly firmed towards the end of the week, to a range of $4-$8 an ounce from last week's $3-$7.
In Hong Kong, premiums were little-changed at 70¢ to $1.40, compared with 80¢-$1.30 last week. In Singapore, it was unchanged at 60¢ to $1.50 over the benchmark.
"On the physical front it has been quiet, because gold prices rose sharply," said Brian Lan, managing director at Singapore dealer GoldSilver Central. "People have got their bonuses. We see gold prices coming up. But, the Chinese new year is also around the corner and there could be some buying going forward."
In Japan, gold continued to be sold at par with the benchmark on lack of demand due to holidays, a Tokyo-based trader said.
Prices ease off
Meanwhile, gold prices eased on Friday on profit-taking after prices hit a more than six-month high on Friday on concern about an economic slowdown, with the metal still on track for a third straight weekly rise.
Spot gold touched its highest since mid-June at $1,298.42, but was down 0.2 per cent at $1,291.31 per ounce as of 1130GMT.
US gold futures were down 0.1 per cent at $1,293.40, having risen above $1,300 earlier in the session.

• Gold and Forex