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Gold discounts reach 5-month high as easing prices fail to revive demand

In India, discounts of $43 an ounce were offered over official domestic prices, the highest since the last week of March, versus $20 discounts last week

twitter-logoReuters | August 29, 2020 | Updated 13:33 IST
Gold discounts reach 5-month high as easing prices fail to revive demand
On Friday, domestic gold futures traded around Rs 51,200 ($699) per 10 grams, having retreated from a record Rs 56,191 hit earlier this month

Dealers in India offered the highest discounts on gold in five months this week as a dip in domestic prices failed to revive demand, while in top consumer China prices remained at a sharp discount to the international market. In India, discounts of $43 an ounce were offered over official domestic prices, the highest since the last week of March, versus $20 discounts last week. The domestic price includes a 12.5 per cent import and 3 per cent sales taxes.

"When prices were rising, at least investors were making purchases anticipating a further rise. As prices are now correcting due to a strong rupee, they're taking a pause," said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji. On Friday, domestic gold futures traded around Rs 51,200 ($699) per 10 grams, having retreated from a record Rs 56,191 hit earlier this month.

Also read: Sixth tranche of Sovereign Gold Bond opens on Aug 31; check out issue price

A Mumbai-based dealer with a bullion importing bank attributed the higher discounts to rising scrap supplies amid low demand. Chinese discounts eased to $60-$70 an ounce against international spot gold rates, which traded in a $1,902.22-$1,976.03 range, from last week's $80-$70.

While demand may pick up later this year, prices will remain at discounts, said Samson Li, a Hong Kong-based analyst at Refinitiv GFMS, adding selling had slowed relatively. Chinese discounts hit a record $75-$100 earlier in August. Only investment demand picked up slightly, said Peter Fung, head of dealing at Wing Fung Precious Metals. In Hong Kong, gold was sold at anywhere between a discount of $0.50 to a $1.50 premium over global prices.

Also read: Gold price rises after 2 days; silver rates at Rs 65,500

Premiums of $1-$1.50 were charged in Singapore, with buyers taking advantage of price dips earlier this week. "Quite a few refineries and mints are still not fully operational. In addition to the fact that commercial flights are still halted, there is a shortage in physical silver products," said Zvika Rotbart, South East Asia business development executive at J Rotbart & Co.

Also read: Gold prices may fall below Rs 50,000 in coming days; should you buy or wait?

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