Asia Gold-High prices drag India discounts to 7-week low; China demand sluggish
By Rajendra Jadhav and Bharat Gautam
June 10 (Reuters) - Gold discounts in India this week were stretched to their highest level in seven weeks as higher prices repelled demand, while fresh concerns over the spread of COVID in top-consumer China left buyers reluctant to make purchases.
This week, dealers in India were offering a discount of up to $10 an ounce over official domestic prices — inclusive of the 10.75% import and 3% sales levies, up from the last week's discount of $9.
Retail buying in India will remain weak, especially from rural areas as farmers focus on planting of summer-sown crops, said a Mumbai-based dealer with a private bullion importing bank.
"In May, prices were attractive. Retail consumers were buying for weddings. Now buyers will wait for a hefty correction," the dealer said.
Weddings are one of the biggest drivers of gold purchases in India.
In China, gold was being sold at a discount of $1.5 to a premium of $0.5 an ounce versus global benchmark spot rates XAU=.
Physical gold demand in China is pretty sluggish, StoneX analyst Rhona O'Connell said, adding that people haven't been coming back into the market yet after lockdowns were eased, as they are cautious about the outlook and are conserving their expenditure for now.
China's commercial hub of Shanghai faces an unexpected round of mass COVID-19 testing for most residents this weekend - just 10 days after a city-wide lockdown was lifted.nL8N2XW66L nL8N2XV28G
COVID-related restrictions weighed on demand in China in May and "the average trading volumes of Au9999 – a proxy of Chinese wholesale gold demand – witnessed the weakest May since 2013," the World Gold Council said in a monthly note.
In Hong Kong, gold continued to be sold at a discount of about $1.8 an ounce to a $1 premium, while in Japan, gold was sold between a premium of 50 cents and at par with the benchmark.
(Reporting by Eileen Soreng, Bharat Govind Gautam in Bengaluru, Rajendra Jhadav in Mumbai; Editing by Shailesh Kuber)