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Gold Premiums Tumble From India to Hong Kong as Demand Wanes

Tuesday, 28 May 2013 08:25 AM

Gold premiums have tumbled in India and Hong Kong, signaling that the buying frenzy that followed bullion’s slump into a bear market last month has weakened in the largest consumers, while a supply shortfall eases.

Premiums paid by jewelers to banks in India are being quoted between $3 and $3.50 an ounce over the London cash price, compared with $10 to $12 early this month, said Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation. In Hong Kong, consumers are paying about $3 an ounce compared with $5 to $6 last week, according to Heraeus Metals Hong Kong Ltd.

Gold plunged last month as investment holdings fell, spurring demand for jewelry and coins across Asia and the Middle East as buyers were lured by prices at the cheapest in more than two years. The increased physical demand, which helped bullion to rebound, may now be weakening even as holdings in exchange- traded products shrink further.

“Premiums have come down as demand is slower and there is more supply,” Dick Poon, general manager at refiner and trader Heraeus, said in an interview. “Last month, when the price dropped, many people rushed to buy gold and that created a shortage.”

Gold for immediate delivery plunged as low as $1,321.95 an ounce on April 16 amid speculation that a recovery in the U.S. would prompt the central bank to taper asset purchases. Prices, which rallied to as much as $1,488.09 an ounce by May 3, traded at $1,389.90 at 3:42 p.m. in Singapore.

Physical Buying

The increase in physical gold buying last month shouldn’t be seen as significant additional demand as purchases were merely advanced, according to Credit Suisse Group AG. The situation was comparable to cash-for-clunkers in autos, bringing forward activity, not adding to overall purchases, Ric Deverell, head of commodities research, said on May 16, referring to the U.S. program during the financial crisis that offered incentives for people to trade in older cars for new ones.

Gold is 17 percent lower this year amid the record reductions from holdings in ETPs. Global holdings in the products have declined every week for the past 15, taking reductions to 473.5 metric tons this year.

India’s gold imports in May are expected to be lower than April’s 117 tons as demand tapered off after the main gold- buying festival of Akshaya Tritiya on May 13 and as the wedding season ends, Soni said. Premiums have fallen as demand decreased and supply improved, he said.

Volumes for the benchmark spot contract on the Shanghai Gold Exchange, China’s biggest cash bullion market, exceeded 273 tons between April 16 and 26, according to data compiled by Bloomberg. Volumes, which reached a daily record 43.3 tons on April 22, were 15.6 tons.

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Gold premiums have tumbled in India and Hong Kong, signaling that the buying frenzy that followed bullion s slump into a bear market last month has weakened in the largest consumers, while a supply shortfall eases. Premiums paid by jewelers to banks in India are being...
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2013-25-28
Tuesday, 28 May 2013 08:25 AM
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