High price dents Indian gold demand
Premiums for gold bars were mostly lower in Asia on Tuesday after bullion jumped to two-week highs on fears of worsening debt problems in Europe, while high prices and a volatile rupee curbed demand from main consumer India.
Gold extended gains and rose to its highest since May 11 above $1,518 an ounce, but was still below a record high of $1,575.79 an ounce struck earlier this month. Euro-denominated gold hit a record at 1,081.43 euros an ounce.
Premiums for gold bars edged down in Hong Kong as speculators booked profits, while in Singapore, premiums were under pressure from selling by consumers in Southeast Asia as well as lack of buying interest from India.
Gold bars were offered at premiums of between 80 cents to $1 to spot London prices in Singapore, barely changed from last week.
"We're seeing more transaction today but it's on the selling side. Thailand and Indonesia are selling back gold to the physical market," said a dealer in Singapore.
"There are requests from India but I think it's a lot quieter. They may re-enter the market at below $1,500, or maybe at around $1,480."
Top gold consumer India is in the midst of the wedding season, when demand for gold jewellery typically picks up. India's demand rose 12 percent in the first quarter and was a major driver behind a 7 percent rise in global jewellery demand in the period, according to the World Gold Council.
The Indian rupee, which has a bearing on the landed cost of dollar-quoted gold in the country, clawed up on Tuesday from a two-month low in the previous session, but there was little conviction due to the euro's woes and small gains in shares.
But gold jewellery demand in India will likely remain strong in 2011 despite surging prices, according to the head of Gitanjali Gems (GTGM.BO), the country's biggest jewellery retailer.
Spot gold may extend its current rebound to $1,536 per ounce, as it has broken above resistance at $1,511, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.
Elsewhere, premiums for gold bars slipped to $1.6 to the spot London prices in Hong Kong from as high as $2 last week as higher bullion prices attracted selling.
"Jewellery makers have bought gold at the lower end, that's why we don't see them around," said a dealer in Hong Kong.
"I don't see any interest from China, but I think they will buy if the price drops," said the dealer, referring to the world's second-largest consumer.
Jewellers could buy on dips, but some investors were likely to cash in if gold prices rose further.
Gold bars were quoted at a discount of 50 cents in Tokyo from zero last week, with the electronics sectors on the sidelines.
"There's selling back from the general public. The electronics sector is very quiet because the gold price is over $1,500. May be, there will be buying at $1,480," said a physical dealer in Tokyo.