Gold traded at a premium to official domestic prices in India this week for the first time in about a month, while demand remained lacklustre elsewhere in Asia despite a drop in prices. Spot gold fell to a five-week low this week at $1,240.75 an ounce, from a seven-month peak of $1,295.97 on June 6. "While prices have fallen internationally, it hasn't really translated too much in most regions as rates in local currencies remain higher," said one dealer with a Singapore bank.
However, demand in India improved slightly, with dealers charging a premium of up to $1 an ounce over official domestic prices this week, against a discount of $3 last week. The domestic price includes a 10 percent import tax. "Jewellers are now focusing on implementation of the GST (goods and services tax). They are not making new purchases," said a Mumbai-based bank dealer with a private bank. The GST will replace a slew of federal and state levies from July 1, transforming Asia's third-largest economy into a single economic zone with common indirect taxes.
China registered a slight improvement in demand compared with last week, but buying sentiment remained weak overall, traders said. Prices below $1,250 an ounce induced some small-scale buying, according to Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. The premium, however, remained unchanged from last week at $8 to $10 an ounce.
"In China consumer sentiment is weak. People are not spending money and also looking to fashion jewellery rather than investment-driven purchases," said Cameron Alexander, an analyst with Thomson Reuters-owned metals consultancy GFMS. "While demand for 24-carat jewellery has come down heavily, it is strong for 18-carat. However, the overall market is weaker."