London 06/05/2016 - Premiums for gold kilobars held at low levels or moved deeper into discounts amid soaring prices - spot gold hit 15-month highs on Monday.
Gold broke through the $1,300 ceiling before being pegged back into the high $1,280s on profit taking.
Higher dollar prices for gold pushed premiums for the metal lower and widened discounts in several locations this week when sellers looked reap profits and buyers drew back from the market.
Although most jewellers have reopened in India after an extended strike in protest against a tougher tax regime, supply is ample there. Meanwhile, the Japanese market was quiet throughout the week for national holidays.
Elsewhere, political strife continues to rattle the lira in Turkey, with trading there suffering as a result.
INDIAN DISCOUNTS WIDEN, HIGHER PRICES LIFT OFFERS
- Premiums on gold kilobars in India moved further into negative territory this week, with sellers willing to offload material at discounts to take advantage of higher prices.
- Having been available between a small premium of 50 cents and a discount of $3 last week, 99.5-percent-purity kilobars traded at discounts of $5-8 per ounce this week.
- "Refiners, banks and bullion dealers are sitting on huge, huge stocks and it makes profit sense [for them to sell] because they bought at a lower duty and a lower price… if they sell at a discount, they're still making loads because gold prices have run up" - source in India.
- Physical buying is gathering pace ahead of the Akshaya Tritiya festival on May 9. As one of the most auspicious days in the Hindu calendar, it traditionally leads to a spike in gold sales.
- But although sales of gold jewellery have increased, demand on the whole has been muted, sources said. Higher prices and fears about India's economic outlook are supressing buying.
- "That's the biggest surprise - we're just days away from the biggest gold buying day in India and we're not at a premium" - a source.
- Imports remained low in April - the jewellers' strike limited buying.
- "A lot of attention on this year's elections. Transferring funds in and out of India is being highly scrutinised so a lot of people aren't doing it… There's more inter-domestic trading" - trader.
CHINESE PREMIUMS HOLD, THIN DEMAND KEEPS IMPORTS LOW
- In Shanghai, the premium for four-nine kilobars held at $1.00-2.00 per ounce over the London spot price in a shortened trading week - China was largely absent from the market on Monday due to the Labour Day holiday.
- "We haven't seen any meaningful pick-up from the three-day holiday. The current high gold price keeps consumers away from jewellery shops" - local analyst.
- Gold closed at 268.23 yuan per gram in China on Friday, up from 224.77 yuan on the first trading day of 2016, according to Shanghai Gold Exchange data.
- China's total gold consumption, around 61 percent of which is in the form of jewellery, fell 3.91 percent in the first quarter year-on-year to 318.28 tonnes, the China Gold Association said this week.
- With consumer buying interest for jewellery waning in a downbeat economy, several Chinese banks reduced their gold import volumes, banking sources noted.
- "Less supply caused by weaker demand is felt by the market" - local trader.
- Load-out volumes in April from Shanghai Gold Exchange vaults dropped to 171.40 tonnes from 183.24 tonnes in March, according to the SGE's monthly report released this week.
RATES STABLE IN HONG KONG, SINGAPORE, JAPAN BUT LOWER IN BANGKOK
- The Japanese market has been quiet this week - rates held steady between parity and a $1.00 discount - while most participants were absent for the Golden Week holiday.
- In Bangkok, four-nine kilobars traded at a discount of $1.00-0.00 this week, down 50 cents. Most investors moved to the sidelines when gold broke through $1,300.
- Scrap from Thailand usually comes to the market in considerable volumes when the spot price hits this level but large volumes of scrap had already been shipped out earlier in March when the metal hit 13-month peaks, a dealer said.
- In Hong Kong, the physical gold market was stable at 50 cents either side of parity to the London gold price, stable at last week's levels.
- "While the underlying price of gold is up in US dollars, the rest of the world doesn't care - for us in Asia gold's been up for years" - trader.
- The Singapore market also remained at last week's levels of $0.25-0.75.
- "We've seen more sellers than buyers in the market due to higher gold price… there are no buyers at jewellery shops" - second trader.
PREMIUMS IN TURKEY DOWN, DUBAI AND ZURICH UNCHANGED
- Rates have slid in Turkey this week mainly due to higher international prices - 99.5-percent kilobars were available between a discount of $1 and level compared with 50 cents either side of parity last week.
- The lira fell against the dollar to its lowest since February after political fighting between Prime Minister Ahmet Davutoglu and President Recep Tayyip Erdogan led to the former's resignation. This has eroded investor confidence and caused the embattled lira to weaken again.
- "[The drop of the premiums was] mainly due to the depreciation of lira against the dollar of around four percent in the last two days, which at one point reached six percent" - trader.
- In Dubai, higher prices made gold unattractive. Bank buying waned, moving the market to a wider discount of $1.5-0.5
- "There is a lack of liquidity in the banks because of the high gold price" - second trader.
- Premiums for four-nine kilobars in Zurich were steady at $0.5-1.25 per ounce.
(Reporting by Archie Hunter, Meimei Qin and Vicky Chen, editing by Mark Shaw)