London 29/03/2012 - Gold buyers remained on the sidelines in Asia this week on worsening sentiment despite the recent drop in prices, traders said.
Gold fell 2.5 percent on Wednesday from Tuesday's two-week high of $1,697.30 on profit-taking and it continued to drop to around $1,654 on Thursday.
Indian demand was still weak while the strike by goldsmiths and jewellers in the northern area of the country entered a second week, while shops in the south are now partially open.
Gold bars were sold at a one-percent discount compared with last week's range of 0.5-one percent, an Indian dealer said.
"There is valid concern over Indian gold demand which may decline on the back of higher domestic taxes on the gold industry," broker Standard Bank said.
Earlier this month, the Indian government doubled the import duty on the metal to four percent. This comes after January's increase to 2.06 percent of gold's value from a previous flat rate of 30,900 rupees per net kilogram.
"I don't think even a gram of gold has been cleared under the new duties and all shipments to India are on complete hold," the dealer said.
""The government is not likely to budge as they have the support of the main industrial lobbies," he added. "It's a common perception now that gold is a threat to trade balances."
Double-digit growth in Indian gold imports over the past few years is deemed to have contributed the country's growing account deficit.
There are hopes that next month's Akshaya Tritiya festival - which Hindus believe is a particularly good time to purchase or wear gold, which signifies unending good fortune - will lift buying over the coming weeks.
Elsewhere in Asia, combined flows on the two physical contracts on the Shanghai Gold Exchange (SGE) fell to 172,496 kilograms so far this month from 188,237.40 kg in the same 2011 period.
Premiums on the SGE were firmer at around $6-8 per ounce over the London spot price. After the Chinese New Year, SGE premiums have ranged between $5 and $7, down from around $10-12 before the holiday.
"Although premiums look firmer and the spot [price] is relatively lower this week, demand is really lagging behind in Shanghai and trade has been quiet so far," a Switzerland-based trader said.
The SGE has this week temporarily raised initial margin requirements on its gold contracts to prevent price volatility in the market during the Ching Ming Festival holiday on April 2-4, when the exchange remains closed.
The margin - a sum that must be maintained on deposit - on the gold contract will rise to 14 percent from 12 percent. The price range limit will also rise on March 30 to 11 percent from nine percent. These will revert to pre-holiday levels when trading resumes on April 5, however.
Physical markets have also been slow in other Asian countries, unable to pick up "the slack resulting from the selling pressure", Gerry Schubert, head of precious metals at Emirates NBD, said.
Premiums in Hong Kong were hovering between $1.10 and $1.60 per ounce, the European trader said.
"Asia in general is very quiet, with demand in Thailand and Vietnam non-existent," he added.
But demand remained encouraging in Dubai, where activity restarted at the beginning of March after a protracted period of immobility.
"The physical buying from our customer base in Dubai has been solid and is encouraging but the bigger markets, like India and Shanghai, have not shown any positive signals," Schubert said.
One-kilo gold bars were trading at $0.50 per ounce over the London spot price this week.
(Additional reporting by Angel Sharda, editing by Mark Shaw)
| TIME | |||||
|---|---|---|---|---|---|
| Sydney | Tokyo | Ha Noi | HongKong | LonDon | NewYork |
| Prices By NTGOLD | ||
|---|---|---|
| We Sell | We Buy | |
| 37.5g ABC Luong Bar | ||
| 5,333.50 | 4,913.50 | |
| 1oz ABC Bullion Cast Bar | ||
| 4,426.80 | 4,026.80 | |
| 100g ABC Bullion Bar | ||
| 14,205.60 | 12,905.60 | |
| 1kg ABC Bullion Silver | ||
| 1,728.40 | 1,378.40 | |
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