A sustained record rally in domestic gold prices crippled the typical busy wedding season demand in India, with dealers forced to offer heavy discounts this week while scrap supplies piled higher.

Domestic prices in India, the world’s second-largest gold consumer, were near an all-time high of 66,943 rupees per 10 grams hit last week, following a similar rally in global benchmark spot prices driven by bets for U.S. interestrate cuts, central bank buying and safe-haven demand.

“Record high prices have screwed wedding season demand. Those needing to make purchases are just exchanging old jewellery for new jewellery,” said a New-Delhi based jeweller.

This forced dealers to further hike discounts to the highest since March 2023, at $40 an ounce over official domestic prices - inclusive of 15% import and 3% sales levies - from last week’s $38 discounts.

Asia gold: Dealers grapple as sky-high rates erode demand in key hubs

Jewellers are refraining from purchasing from banks due to weak retail demand, and as they are receiving sufficient scrap supplies, said a Mumbai-based bullion dealer with a private bank.

Elevated prices are also expected to hurt India’s gold imports in March.

In China, gold premiums increased to $15-$35 per ounce over benchmark prices from $15-$25 last week, amid robust safe-haven demand.

Shanghai Gold Exchange gold prices surged to new highs driven by strong physical demand and a weakening yuan (RMB), leading to a spike in premiums towards the week’s end, said Bernard Sin, regional director, Greater China, at MKS PAMP, adding that China could continue building its gold reserves.

But potential import restrictions due to the depreciating yuan could lead to even wider swings in gold premiums, Sin added.

Asia gold: India premiums hit 4-month highs, jewellers stock up for weddings

China’s central bank controls the inflow of gold via import quotas issued to banks.

In Singapore, bullion was sold at anywhere between $1 to $2.75 premiums, and at $1.5-$3 premiums in Hong Kong.