With last month’s discounts due to dealer demand, gold prices in top consumer India are heading towards premium rates and a global benchmark. Indian gold prices, at $2-$3 an ounce over the international benchmark, are expected to remain at this range in the short term.
According to traders, prices last month were at a discount of nearly $16 an ounce with demand being so weak and a sufficient supply in the market. “Wedding demand has started picking up at lower prices,” said Narendra Singh, owner of Kiran Jewelers in Jaipur. “Presently, supply is smooth and gold is available as per the requirement, but imports may increase in the coming months on increased demand,” he said.
Last year, India climbed above China as the top international consumer of gold with jewelry demand setting record highs. Gold just so happens to be a popular wedding present in India, as well as auspicious occasions. Sustained demand from India is helping support gold prices, which is presently trading above 5-week lows. However, gold could also see an underpinning of it prices after the Chinese Lunar New Year even with sales below last year’s marks. According to traders at an import bank in China, “Sales of jewelry and small gold bars are good, but demand is probably slightly lower than last year’s levels.”
Lately, Chinese consumers have been very cautious with their gold purchases after prices dropped 28 percent and were followed by recording-setting buying in 2013. Even with steady premiums of $3 to $4 an ounce this week on the Shanghai Gold Exchange, cautious pricing outlooks and an anti-graft drive have kept some Chinese buyers away. Last year’s Lunar New Year holiday saw premiums at $10 and above ahead of the 2013 festivities.
According to Howie Lee, an analyst at Phillip Futures, “Short-covering may lift gold for the time-being, but post Chinese New Year, we could see gold taking a tumble again.” Lee’s firm expects gold to flirt with $1,200 an ounce by the first quarter’s end.
