Gold in India has remained in a premium as buyers continue to react to both the recent price collapse and make purchases ahead of the fast-approaching festival season.
Gold for immediate delivery has held in a premium of around $2 above the London spot price on .995 gold, traders in India told FastMarkets.
Just 14 days ago, discounts were around $5, however a collapse in the international spot price last week and better-than expected rainfall across much of the country has helped push the price back into a premium.
Local traders say that there has also been a rush of fabrication demand ahead of the widely-anticipated India International Jewellery Show in early August.
The return of demand comes as monsoons continue to lift sentiment – rainfall across much of India’s key agricultural areas in eastern and western Maharashtra, the Northern states and Rajasthan has been in “excess” of the long-term average, according to the Indian Meteorological Department dated July 30. There is however deficient rains in some of the southern states on the west coast.
The domestic agricultural sector accounts for as much as 60 percent of gold demand as farmers use gold as a primary store of wealth because they have limited access to the formal banking system. Any disruptions to annual rainfall can have a profound effect on the local gold market.
Inventories remain high following the removal of the 80:20 legislation in November – around 52 tonnes were imported in June following 63 tonnes in May, 81 tonnes in April and 125 tonnes in March.
Sources suggest that there has been a small rush of metal into the country in the final days of the month, imports could even hit 50-60 tonnes again in July – though much of this gold is likely to be in the form of semi-pure doré bars. Sources suggest that this is due to many refineries looking to take advantage of the import tax differential and that they are becoming more and more “aggressive” in their pursuit of the semi-pure bars.
As a result, one source maintains that there could be as much as 100 tonnes of gold being held by bullion dealers and jewellers collectively across the country.
In China – the situation has, according to local traders, been slightly misunderstood. While the premium in Shanghai has yet to really react to that huge drop in the international price – there is still plenty of demand around, a trader told FastMarkets.
Large supply and cheap recycled bars are weighing on the premium, he said, “but they are buying – that is for sure,” he added.
Sources have quoted the local premium at an unchanged $1.50 over the London spot price – which is trading just marginally above its lowest in five years at $1,080.
Interestingly, withdrawals from Shanghai Gold Exchange vaults would appear to back up the claims. For the week ending 24 July, withdrawals were at 73.29 tonnes – the highest amount of gold removed from the vaults in around 18 months. July’s withdrawal figures look set to dwarf any recent records.
Though recent import figures have been relatively lower, Combined shipments of gold to China from Hong Kong and Switzerland for June amounted to 36.10 tonnes, the lowest in some time.
In Hong Kong, sources pegged the premium at around 80 cents over spot on Swiss brands and around 60 cents on Japanese brands.
In Tokyo, however, the market remains in discount, though traders have noted a small uptick in demand in line with the weaker yen and drop in the international spot price. The market is still in a discount, local traders said, but faring better than the usual spread of 50 cents to $1. Today, sources pegged the discount spread at around 30 to 80 cents, unchanged from last week.
In Turkey, the market continues to react to the recent slump in international prices. Furthermore, the conclusion of Ramadan and the start of the wedding season has resulted in an upward shift in demand. This comes despite a weakening lira, which ultimately pushes higher the local price of gold. According to sources, the premium of around $3 has held on the favoured LBMA .995 1kg bar.
Turkey’s gold market had long been trading at discount in the face of political instability, economic weakness and double digit unemployment.
Turkish imports of gold hit their lowest this year in June at 1.3513 tonnes, the lowest since February 2014. Still, much of Turkey’s supply comes from the secondary market and the country’s small mining industry.
In Dubai, the market is trading at a slight premium on fresh bars – sources quoted the market at 30 to 50 cents on .995 bars, though there are still discounts on recycled bars. In Singapore, the premium dropped slightly to $1 on Swiss brands, sources said.
In Bangkok, gold is at a premium of around $1.30 to $1.50 on 96.5 percent purity bars direct from the refiner and at around parity on recycled bars.
(Editing by Tom Jennemann)
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