Indian gold prices at discount on weak demand

MUMBAI/BENGALURU (Reuters) – Gold demand fell in India this week, with dealers offering a discount for the first time in one month despite a correction in local prices as consumers advanced purchases in June before the rollout of a new nationwide sales tax.

Elsewhere in Asia, a spurt in buying was short-lived as global prices recovered from near four-month lows hit on Monday.

Bullion dealers in India offered a discount of up to $ 1.20 an ounce this week over official domestic prices, compared with a premium of $ 2.00 last week. The domestic price includes a 10 percent import tax.

Consumers bought more gold in the last week of June to avoid paying a higher 3 percent rate under the Goods and Services Tax that came into effect from July 1.

“Retail demand is very weak. That’s why even jewellers are trimming purchases,” said Daman Prakash Rathod, director at wholesaler MNC Bullion in the southern Indian city of Chennai.

Gold prices in India are trading at near their lowest level in six months.

India’s gold imports in June more than tripled from a year earlier to 75 tonnes, but it could fall below 35 tonnes in July, consultancy GFMS said.

“The market is oversupplied despite lower imports in the first week of July. There is ample stockpile from last month’s imports,” said a Mumbai-based dealer with a private bank.

In top consumer China, premiums were at $ 10.00 per ounce, compared with the $ 9.00-$ 10.00 range last week, while in Hong Kong, the premiums were at 70 cents to $ 1.00 against 50 cents-$ 1.00 in the previous week.

“There was quite a bit of physical buying when prices dropped, but with prices going back up slightly around the $ 1,220 level, demand has stabilised,” said a Singapore-based dealer.

The international spot gold benchmark was little changed around the $ 1,218 per ounce level on Friday and was on track to register its first weekly gain in three, having recovered from Monday’s $ 1,204.45, the lowest since mid-March.

Singapore premiums fell to between 80 cents and $ 1.10, compared with premiums of $ 1.20-$ 1.30 last week.

In Tokyo, prices were steady against benchmark rates.

“People are keeping the cash, especially in view of travel plans during the summer holidays,” a trader in Japan said.