Gold holds near three-week high as India buys ahead of festival

[SINGAPORE] Gold traded near a three-week high on speculation demand will be boosted by the Diwali festival in India, the world's largest bullion-consuming country after China.

The metal for immediate delivery was at US$1,274.19 an ounce at 8:21am in Singapore after touching US$1,276.78 on Tuesday, the highest level since Oct 5, according to Bloomberg generic pricing. Bullion is still heading for a monthly drop.

While physical demand in India has been weak in 2016, support is seen coming back into the market ahead of the festival this weekend and the wedding season.

Gold's rally in the first half has sputtered on the increasing probability of an interest rate hike from the Federal Reserve by the end of the year.

"Increasing confidence in stronger physical demand has seen gold prices push higher," Australia & New Zealand Banking Group Ltd said in a note.

"India is at the height of its Diwali religious festival, where gold purchases usually surge."

BLOOMBERG