COVID curbs take a toll on Chinese demand, India discounts fall

Higher prices limit retail purchases in India: dealer

Higher prices limit retail purchases in India: dealer

Physical demand for gold in top consumer China was muted this week as COVID-induced restraining dampened sentiment, while discounts in India fell to two-month lows on a slight improvement in demand and lower scrap supply.

“Demand (in India) is slowly improving, but higher prices act as a major deterrent to retail buyers,” said Mukesh Kothari, director of precious metals trader RiddiSiddhi Bullions in Mumbai.

This week, dealers offered discounts of up to $12 an ounce above official domestic prices, including 10.75% import duties and 3% sales taxes, down from last week’s $40 discounts.

Discounts are falling because of lower imports in March and because the flow of old jewelry and coins, or scrap stocks, has declined this week, a Mumbai-based gold trader with a private bank said.

However, higher prices could spoil demand during the upcoming festivals and wedding season, the dealer said.

In China, discounts of $4.25-$6 an ounce were offered against the global benchmark spot prices. Last week, Chinese dealers sold gold at a $3 discount to a $2 premium.

“With this severe shutdown in both Hong Kong and Shanghai, the metal is not moving significantly,” said independent analyst Ross Norman, adding that “Asian demand is very light and very weak at the moment.” China’s zero-COVID policy has trapped millions of people, including the financial center of Shanghai, and clogged highways and ports.

“Sentiment is quite low there, with lockdowns, in-home confinement and some essentials shortages starting to develop,” said StoneX analyst Rhona O’Connell.

In Hong Kong, gold was sold at a discount of $1.80 to a premium of $0.80 an ounce, while Singapore premiums changed little this week at $1.30 – $1.70 an ounce.

Meanwhile, gold in Japan traded at a discount of $0.50 to a premium of $0.50, traders said.

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