[MUMBAI] Rising prices curbed physical gold demand from Indian and Chinese buyers, many of whom were reeling from losses in the stock market, cutting premiums on bullion sold in the world's top two consumers.
Spot gold climbed to a five-week high of US$1,141.75 an ounce on Thursday after minutes from a meeting of the US Federal Reserve in July dashed hopes of an interest rate increase in September, as many had been expecting.
For the first time in a month in India, some suppliers were quoting a premium of less than US$1 an ounce over the global spot benchmark. "In the last few weeks importers took advantage of lower prices and bought aggressively. Now they could even sell at a discount if demand remains subdued for the next few days," said a Mumbai-based dealer.
Premiums in India, the world's second-biggest gold consumer after China, hovered between 90 cents and $2 an ounce, down from $1.10 to $2 last week, dealers said.
Gold has rebounded 6 per cent since hitting a 5-1/2-year trough of US$1,077 in a late July rout, gaining momentum since last week after China's shock devaluation of its yuan.
Tracking the recovery, gold prices in India have risen 8 percent from July's four-year lows. "Retail customers have seen gold trading below 25,000 rupees (per 10 grams) last month. Now prices are above 26,000 rupees. So these customers are waiting for a correction," said a jeweller based in the western Indian city of Ahmedabad.
India holds a two-day international gold conference in the western state of Goa starting on Friday.
In Hong Kong, premiums dropped to around $1 an ounce from US$1-US$1.20 last week, dealers said. "Demand is not really exciting," said Dick Poon, general manager at Heraeus Precious Metals in Hong Kong, linking the limited gold appetite from China to investment losses in the stock market. "They lost a lot from the equity market and they don't really have surplus (funds) to buy gold," said Mr Poon.
China's key stock indexes have slid around 6 per cent this week amid concerns that the government could be scaling back efforts to rescue battered markets.
On the Shanghai Gold Exchange, premiums hovered between US$2-US$3 an ounce from about US$4 last week.