Physical gold demand in India was robust this week as retail buyers and jewellers took advantage of a dip in domestic prices to stock up for the wedding season, while gains in the domestic currency kept premiums elevated in China amid steady demand.
Indian gold futures were trading near their lowest level in three months. The domestic price includes a 10 percent import tax and 3 percent sales tax.
The price correction has been helping to boost retail sales for weddings, said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.
Gold is an essential part of weddings in the country.
"Many jewellers had postponed purchases in March due to the financial year end. They are now making purchases," said Mumbai-based bullion dealer with a gold importing bank.
Dealers in the country were charging a premium of up to $2.5 an ounce over official domestic prices, the highest in nearly five months, up from the $1.5 premium last week.
In China, the world's biggest bullion consumer, gold was sold at a premium of $13-$15 an ounce over the benchmark, little changed from last week.
Analysts attributed the elevated premium levels to a stronger yuan, driven by signs of progress on the US-China trade front.
"Improving discourse between the United States and China on the trade front is helping local demand as consumer sentiment will improve significantly and jewellery shops should benefit," said Stephen Innes, head of trading and market strategy at SPI Asset Management.
Washington and Beijing have largely agreed on a mechanism to police any trade agreement they reach, US Treasury Secretary Steven Mnuchin said on Wednesday.
However, sentiment amongst buyers has remained lacklustre, especially going into the second quarter, when jewellery demand is relatively soft.
"In addition, the volatility of the domestic stock market has also discouraged capital getting into gold, as speculators have put their attention on the stock market," said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.
Premiums in Hong Kong and Singapore remained unchanged between 50 cents to $1.20 an ounce and 20-50 cents, respectively, as higher prices dented appeal for the metal.
International benchmark spot gold had a strong run this week after falling to a 10-week low at $1,280.59 in the previous week. "With gold prices trading above $1,300, demand for gold has dried up," said a trader with a bullion bank in Singapore. In Japan, gold continued to be sold at par with global benchmark prices.
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