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Asian physical gold demand was sluggish this week, reflecting customers’ reluctance to make new purchases despite deep discounts, who were instead seen capitalizing on record-high bullion prices.

Indian dealers offered a discount of up to $65 an ounce over official domestic prices, their highest level in 28 months, inclusive of 15% import and 3% sales levies, versus last week’s discount of $31.

Dealers are aggressively selling off gold misclassified as platinum to clear their inventory before the government makes any potential changes to import regulations, said a Mumbai-based dealer with a private bullion importing bank.

In India, the world’s second-largest gold consumer and a major importer, domestic prices hit a record high of 74,731 rupees per 10 grams this week.

“Gold prices are in deep discounts, but jewellers are holding their fire, hoping for an even steeper price drop with a potential import duty cut in the budget,” said an Ahmedabad-based bullion dealer.

In top consumer China, dealers were offering discounts of up to $6 an ounce on international spot prices, the lowest in more than 2 years as per Reuters records. This is compared with premiums of $8-$19 last week.

Asia gold: High gold prices dull activity in India and China

“This week, the record-breaking gold price rally has thrown a curveball at physical buying trends in China,” said Bernard Sin, regional director of Greater China at MKS PAMP.

“Some believe that if gold prices continue to rally, a discount of $15 could become a reality, tempered by the typical seasonal slowdown in demand during the summer months.”

In Singapore, gold was sold at a discount of $0.75 to a premium of $2.20 per ounce and between a discount of $1 to a premium of $2 per ounce in Hong Kong.

Dealers in Japan charged premiums of $0.50-$1 per ounce as big moves triggered more selling than purchases, Tokyo-based traders said.

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