Gold premiums jump over 2-year high; outlook firm
MUMBAI: Premiums for gold bars in India revisited their highest level in over two years on Tuesday, to $2 an ounce above London prices, on a lack of supplies amid firm demand.
The upward bias in premiums is likely to continue, traders and importers said.
"Some suppliers are now charging $2 (an ounce) as there is a big fight in getting supplies... If we place an order now, we get delivery only in 3-4 days," said a dealer with a state-run bullion importing bank in Mumbai.
Gold prices are down 7.2 per cent from the all-time high of $1,430.95 an ounce struck on December 7.
The sudden spike has prompted traders to stock the yellow metal ahead of the wedding season and a slew of festivals in the coming months.
But lack of supplies in the domestic market have exerted upward pressure on premiums, as foreign sellers were unable to keep pace with rising demand.
"Traders are booking because market was not expecting that gold would break $1,340 (an ounce). There could be further buying if prices fall below $1,280," said the state-run bank dealer.
Premiums are expected to continue northward as refiners are unlikely to keep pace with rising demand from Asia.
"The refiners started the year with low inventory and now they are lagging in delivering goods by 8-10 days," said Pinakin Vyas, assistant vice-president with IndusInd Bank , which is also a large gold importer.
India is the world's largest consumer of bullion, accounting for 20 per cent of global demand.
Asia's physical gold market remained buoyant, as prices dipped to multi-month lows and buyers stepped in, betting on ! a price rally after the upcoming Lunar New Year holiday in China.
"Moreover, suddenly there is demand from Asian countries like China, which is also keeping the premiums higher as suppliers would tend to distribute their limited production in between these countries," said Vyas.
Premium for gold bars in Hong Kong stayed around $3 an ounce above London spot prices, with the upside premium quoted at $3.50. Premiums in Singapore were steady at $1.90, but a $3 premium was also recorded.
The upward bias in premiums is likely to continue, traders and importers said.
"Some suppliers are now charging $2 (an ounce) as there is a big fight in getting supplies... If we place an order now, we get delivery only in 3-4 days," said a dealer with a state-run bullion importing bank in Mumbai.
Gold prices are down 7.2 per cent from the all-time high of $1,430.95 an ounce struck on December 7.
The sudden spike has prompted traders to stock the yellow metal ahead of the wedding season and a slew of festivals in the coming months.
But lack of supplies in the domestic market have exerted upward pressure on premiums, as foreign sellers were unable to keep pace with rising demand.
"Traders are booking because market was not expecting that gold would break $1,340 (an ounce). There could be further buying if prices fall below $1,280," said the state-run bank dealer.
Premiums are expected to continue northward as refiners are unlikely to keep pace with rising demand from Asia.
"The refiners started the year with low inventory and now they are lagging in delivering goods by 8-10 days," said Pinakin Vyas, assistant vice-president with IndusInd Bank , which is also a large gold importer.
India is the world's largest consumer of bullion, accounting for 20 per cent of global demand.
Asia's physical gold market remained buoyant, as prices dipped to multi-month lows and buyers stepped in, betting on ! a price rally after the upcoming Lunar New Year holiday in China.
"Moreover, suddenly there is demand from Asian countries like China, which is also keeping the premiums higher as suppliers would tend to distribute their limited production in between these countries," said Vyas.
Premium for gold bars in Hong Kong stayed around $3 an ounce above London spot prices, with the upside premium quoted at $3.50. Premiums in Singapore were steady at $1.90, but a $3 premium was also recorded.
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