Buyers took to the sidelines of Asia’s physical gold market on expectations that prices would ease slightly in the short term,although demand is likely to improve over the rest of the year on seasonal factors in India and China.
Gold prices rose to near $1,800 last week after fresh stimulus measures from central banks enhanced the appeal of bullion as a hedge against inflation. People will buy a bit when prices fall below $1,760 an ounce,said Ronald Leung,a dealer at Lee Cheong Gold Dealers in Hong Kong.
Jewellery need to buy a bit of stock to prepare for the wedding season in India,as well as the high consumption season in China.
Spot gold traded at about $1,770 on Friday,easing from an 11-month high above $1,795 hit last Friday. Traders and analysts expected prices to ease towards $1,750 or lower,before rising to as high as $2,000 in the next few months on aggressive stimulus measures adopted by various central banks.
Dealers said orders from China around last week’s National Day holiday — a popular time for weddings and other celebrations — were muted. We don’t have any request for consignment,said a Singapore-based trader. The feeling is that there are a lot of consignment stocks parked around China. Net gold flows from Hong Kong to China in August dropped 26 percent from a year earlier,as high gold prices and a slowdown in economic growth weighed on appetite,official Hong Kong trade data showed.
But a softening rupee has pushed up local gold prices and is dragging on buying interest from India,the world’s top gold consumer,just as festival celebrations pick up. The rupee depreciated again,which has created some strain on physical gold demand,said a dealer at a private-sector bank in Mumbai,adding that buyers are eyeing 31,200 rupees to make purchases. We are entering the season to buy gold now,so I think if there is any significant dip,you should see strong support from India.
India’s benchmark gold on the Multi Commodity Exchange was trading at 31,350 rupees per 10 grams.
Gold bar premiums in Hong Kong were steady from a week earlier,quoted in a range of 30 to 80 cents an ounce above London prices,dealers said. The gold premium in Singapore was about 20 cents.
India’s festival demand will be under the spotlight,as it is expected to pick up in late October and peak next month during Diwali and Dhanteras,traditionally occasions for buying gold.
Market participants will also closely watch developments in the euro zone debt crisis,which may give direction to gold prices.