London 18/03/2016 - Gold kilobars for immediate delivery were in discounts in most major gold-consuming centres this week after spot prices surged $30 on Wednesday when the Fed kept interest rates unchanged and cut its expectations for rate raises in 2016 to two from four.
India has remained in focus - a nationwide strike by jewellers that followed the release of the government's budget has lasted for more than two weeks, resulting in stagnant rates and an uncertain outlook.
The market also moved into a discount in China mainly while demand in Turkey is getting progressively weaker amid higher prices and a sluggish domestic economy.
By contrast, premiums in Europe have been largely stable this week, reflecting decent demand for the metal across the region.
"What I'm seeing is some people are wary of the price but what they're doing is that this movement has woken a number of people who were considering gold but haven't pulled the trigger," a trader in Europe said.
"We are finding a lot of enquiries, [which are] not yet leading to a physical trade but all of them are for physical - all of them regret not buying it earlier and that's not surprising," he added.
The spot gold price was last at $1,252.55 per ounce on Friday, little changed from last week but down from the 13-month high of $1,289 set on March 11.
INDIAN STUCK AT HEAVY DISCOUNTS OVER STRIKES
- Gold in India remains at heavy discounts, with the market gridlocked by the continuing jewellers' strike - 99.5 percent purity gold kilobars are still at a discount of $35.00- 25.00 per ounce below the London price.
- Jewellers are striking in protest principally against the government's one-percent tax on gold jewellery sales introduced during the latest budget.
- But there are still pockets of demand from a few companies that export gold goods and have contracts with foreign companies, sources said.
- "Gold is still coming for the jewellery manufacturers who export because they need to fulfil their orders… but other than that there is barely a single trade because of the strikes" - local source
RATES WIDEN IN CHINA, DISCOUNT EMERGES AFTER SHARP PRICE RISE
- Discounts have started to emerge in China - gold has widened to a range of a discount of $1.00 to a premium of $2.00 per ounce this week over the London spot price on the favoured four-nine kilobars from premiums of $1.00-2.00 last week.
- Various sources attributed the move to a combination of a sharp rise of international gold prices after the Feds's surprisingly dovish statement and a strengthening yuan.
- "The London gold price was running up but it took time for the Chinese gold price to catch up due to a response lag - that's why the discount appeared" - trader in Europe.
- The yuan has risen by more than 500 pips to about 6.4656 against the dollar late this week.
- On the demand said, the Chinese continue to buy into gold-backed exchange-traded funds (ETF) but at a slower pace this week than previously while physical demand is still tepid, local traders said.
- In Hong Kong, rates stabilised at $0.00-0.80 amid unexciting local buying, with a handful of Swiss bars reportedly fetching premiums of $1.00 to meet demand from mainland China.
DISCOUNTS HOLD IN TOKYO; PREMIUMS IN SINGAPORE, BANGKOK MOSTLY STABLE
- The market in Tokyo remained at a discount, with very few trades reported - buying interest in Japan remains thin, which reflects a 17-percent rise in the gold price so far this year.
- "Individuals holding gold as jewellery and small holders - they've been selling especially [to] Thailand and some parts of China, so at the moment I think the demand is very limited," - trader in Japan.
- In Bangkok, 99.99 gold is fetching premiums of $0.50-1.00, with Swiss bars at the top of the range and local bars at the bottom.
- "We've seen some demand for Swiss bars [from Thailand] this week" - trader in Europe.
- Premiums in Singapore were stable at $0.75-1.25.
TURKEY DISCOUNT WIDENS
- Gold kilobars slipped further into discount in Turkey, with little metal traded during the past week.
- Gold kilobars with 99.5 percent purity have moved to a discount of $1.00-0.50, having been between a $1 discount and a $1 premium last week.
- Four tonnes of gold traded on the Istanbul Gold Exchange, also down on the previous week.
- A terrorist car-bombing in the Turkish capital city of Ankara has sapped consumer confidence.
- "People buy jewellery when they feel good and secure but there is not much positive going on in terms of anything to support demand" - local source.
- Meanwhile, gold in Dubai is stable either side of parity, trading between a 50-cent discount and a 50-cent premium.
- "Some money in the Middle East is preferring Europe as a location - they want the safe haven of the metal but also the location" - second source.
FLIGHT TO QUALITY MAINTAINS EUROPE UPCHARGE
- Premiums in the European markets were stable this week despite the rise in the gold price and amid continued interest in the metal for investment purposes.
- Gold with 99.99 percent purity in Zurich traded with premiums of $0.50-1.00 per ounce over the past week, sources said.
- Demand from institutional investors looking for safe-haven value remains strong.
- "Certainly, I've found an increase in the past week so for us what is going on [with the rising prices] is only helping - I think if the market rallies further we will actually see a lot of people enter the market who were holding back because of the [higher] price" - trader.
(Editing by Mark Shaw)