Physical gold demand slowed in China and India this week and forced dealers to offer discounts, with volatile prices in India prompting buyers to delay purchases.

Indian dealers offered discounts of about $5 an ounce over official domestic prices — inclusive of 15% import and 3% sales levies — compared with $4 premiums last week.

“Buyers aren’t willing to make purchases at current price levels. They think prices will correct in coming months,” said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsingji.

Local prices were around 59,900 rupees per 10 grams on Friday, up 9% so far in 2023.

Jewellers weren’t making purchases with wedding season demand nearly over and no big festivals in the near-term, said a Mumbai-based dealer with a private bullion importing bank.

Top consumer China raised gold holdings for a seventh straight month to 67.27 million fine troy ounces by May-end.

Asia gold: Price uptick stalls demand in India

“China had started to reduce its very considerable U.S. government treasury holdings in recent years, with gold perhaps being used as part of its transition into other treasuries and asset classes,” said SP Angel partner and mining analyst John Meyer.

In China, gold changed hands between discounts of $3 and $3 premium to global prices.

There’s continued demand for gold from the People’s Bank of China as a safe-haven against economic risks, said Bernard Sin, regional director, Greater China at MKS PAMP.

But the yuan’s weakening caused fluctuations in premiums, he added.

In Hong Kong, gold was sold on par with global prices to $2.50 premiums.

Retail buying interest was low, said Peter Fung, head of dealing at Wing Fung Precious Metals.

Singapore dealers charged $1.50-$2.50 premiums.

Premiums haven’t moved much since supply and demand are steady, with investor caution ahead of the U.S central bank’s interest rate decision slowing purchases recently, said Herman Chong, business development manager at Rotbart & Co.