China's gold purchases have slowed in recent weeks but premiums for gold bars in the key trading centre of Hong Kong were mostly steady due to tight supply and better demand from elsewhere, traders said on Tuesday.
Premiums for gold bars were unchanged at 10 to 20 US cents an ounce to London physical prices in Hong Kong, which deals with mainland China, Japan and South Korea.
Gold is mostly used for jewellery and investment in Asia.
"Demand is not too strong after a long holiday in May. It's a usual situation," said Ellison Chu, a senior manager at Standard Bank London in Hong Kong.
A week-long May Day break in China, the world's third-largest gold consumer, had boosted demand and pushed up premiums to as high as 40 US cents an ounce.
Dealers in Japan said premiums to London spot prices were steady at $1 an ounce, compared with zero a few months ago, because of the yen's strength, which makes gold cheaper for local gold buyers.
"People talk about a shortage of gold bars, and I would say that's true. It's definitely not a market rumour," said another dealer in Hong Kong.
"When gold price went down to $378 a number of weeks ago, there was a mass buying that brought out all inventories. This happened everywhere," he said.
Spot gold was trading at $394.40/395.15 an ounce by 0254 GMT, compared with $393.40/394.15 last quoted in New York on Monday.
Some dealers said tight supplies would provide some support for the premiums, though gold prices had started to climb again because of the dollar's weakness. Investors often take profits each time prices rise, putting pressure on premiums.
In Singapore, the entry point for much of bullion trading in Southeast Asia, gold bars remained as high as 70 US cents an ounce to London physical prices despite some profit-taking.
Some dealers said gold's safe-haven premium had been highlighted as Iraqi insurgents stepped up deadly attacks before the US occupation authority turns over power to an interim Iraqi government in late June.
The World Gold Council said earlier in June consumer demand for gold, including jewellery and retail investment, rose 12 percent to 681 tonnes in the first quarter of 2004 compared with the same period a year earlier, despite prices hitting 15-year highs.
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