Gold in Mumbai has swung to a discount in some cases amid dwindling demand, sources said – a story that is again being reflected across Asian markets.
The rate on gold for immediate delivery in Mumbai has dropped to as low as a discount of $1 to the London spot price at some smaller dealers although some sources suggested that deals are still being done at premiums of $1 at larger organisations.
“Generally, the gold market is very quiet at the moment – there really hasn’t been much activity since Akshaya Tritiya,” Metals Focus’ Chirag Sheth told FastMarkets.
With the wedding season coming to a close in June, most related purchases should already have taken place, Sheth also said, adding that from mid-June to around mid-October there will be a noticeable slowdown in this area.
While currency weakness is likely to be playing on sentiment – the rupee recently hit its worst against the dollar since September 2013 – consumers are more focussed on the prospective announcement of the uniformed tax scheme that is being planned by the Indian government, traders said.
The new bill aims to tackle the wide number of levies and taxes across the country and instead replace it with a single goods and services tax (GST) that is anticipated to be implemented in the next financial year.
Domestic gold inventories are still likely to be high following huge imports of 125 tonnes in March an an estimated 75-80 tonnes in April – the official reading is due in the next few days. So far in May, imports have been around 20 tonnes, sources claimed.
Moreover, the country’s crucial monsoon season is fast approaching. India’s Indian Meteorological Department predicts rains to be 93 percent of a long-term average, which would be below the typical 96-104 percent.
Since India’s 120 million farmers account for around 60 percent of domestic consumption, any impact on agricultural output can have a sustained effect on demand.
In other markets, demand in Shanghai this morning was much better than in recent sessions despite recent stagnation around $1. Today the premium in Shanghai was quoted at around $2-3 over spot – volumes picked thanks to increased activity on international markets, with suggestions that the US may delay plans to normalise monetary policy in light of a potential slowdown.
“Once again the markets are completely currency driven,” a bullion dealer told FastMarkets.
The dollar is down once again today, hitting its lowest level since February at 1.1444 against the euro, folliowing a run of forecast-missing data.
Withdrawals from the SGE – a useful barometer for local wholesale demand – for the week ending April 24 were 38.35 tonnes, up from 50.80 tonnes in the prior week. More than 820 tonnes have passed through the vaults in 2015.
In Tokyo, the weaker yen and generally subdued tone continues to keep movements on the premium fairly stagnant – despite the country observing its three-day Golden Week holiday last week.
The last indications from sources were that the market has remained around parity, with some small discounts of around 50 cents to the London spot price – slow demand in Hong Kong and China are weighing.
The Turkish market also remained fairly stagnant, with many consumers now looking ahead to the crucial June elections, which are likely to have implications for the country’s economy.
Economic instability and double-digit unemployment have hindered consumption this year – the latest first-quarter report from the World Gold Council saw Turkish jewellery demand down 28 percent year-on-year in the first three months.
Today, the premium remained at parity on the favoured .995 LBMA 1kg bar, according to Troy Precious Metals GoldTakas system.
But the wedding season approaching when demand is expected to pick up – premiums of $2-3 are considered the norm, though the election-related economic uncertainty may weigh, it told FastMarkets.
In Dubai, the market has dropped to a discount of around 50 cents on .9999 and .995 bars.
In other locations, Hong Kong sources pegged the premium at $1.20 over spot, in Singapore around $1.20 and in Bangkok around $1.50.
(Editing by Mark Shaw)
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