The premium for gold in Shanghai remains high, sources said, although physical buyers are reportedly holding off in anticipation of lower prices before investing further.
Gold for immediate delivery in Shanghai was quoted at $4 over the spot price by MKS, though it has been around $5, with the international spot price trading around its lowest in four months at $1,155 per ounce.
Hopes that China would return to the market in force on Monday morning after significant price falls at the end of last week proved unfounded – buyers are awaiting sub-$1,150 levels before steeping back in, one source suggested.
“We were expecting some fireworks on [Monday's] open following the huge sell-off in precious last Friday but in never came,” MKS’ Alex Thorndike also said. “Perhaps many of the physical traders think we have further to go to the downside?”
But in the longer term, with a US interest rate rise looming, many buyers may be eyeing $1,000, the source added.
Still, the premium for immediate delivery remains solid, even though many predicted that restocking demand after the Chinese New Year would fade within days of markets there reopening.
Withdrawals from the Shanghai Gold Exchange – a useful barometer for wholesale demand – for the two-week period ending February 27 reached 37.92 tonnes – meaning that 411 tonnes have passed through the vaults in 2015 so far.
This was significantly lower than the average of 62 tonnes in the previous few weeks but this reflects the interruption of the holiday – the figure covers February 16, 17, 25, 26 and 27.
In India, premiums continue to stagnate while demand fails to live up to expectations – it remains at $2-3 over spot for immediate delivery even after several large banks had suggested that demand that had built up ahead of the annual budget would push rates higher when it was fulfilled.
Although activity is now starting to pick up, according to Metals Focus’ Chirag Sheth, he expects demand to remain subdued until April or May.
This follows New Delhi’s decision not to lower the import duty on gold from the current level of 10 percent – instead, it opted for further monetisation of gold through the introduction of a gold-centric bond and a new gold deposit scheme.
These are the latest state-led initiatives to tap into the vast wealth currently stored by Indian families. Should they prove successful, they could ease over the long term the need to import gold – though previous attempts have foundered, failing to find support among grassroots consumers.
Imports in February were 25-30 tonnes, sources said, with the March total expected to be largely similar, although official confirmation is not expected until mid-month.
In other locations, the build-up of material in Hong Kong is starting to fade, which in turn has lifted the premium to $1.50 over spot. In Singapore, gold for immediate delivery climbed to $1.50, while in Bangkok premiums have remained around $1.50 over the London spot.
In Dubai, premiums remain around 35 cents on the .995 bar and 50 cents on .9999 bars due to lower prices that have encouraged some further buying in the region.
In Turkey, the market remains at parity, according to Troy Precious Metals GoldTakas system, although demand is expected to increase in April on the favoured .995 LBMA 1kg gold bar.
(Editing by Mark Shaw)
The post Chinese gold demand on hold for cheaper prices, Mumbai premium flat appeared first on The Bullion Desk.
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