Floods hit festival buying

MUMBAI/BENGALURU: Demand for physical gold was modest in India this week as the top bullion consuming state of Kerala coped with floods, while interest for the metal remained lacklustre elsewhere in Asia as buyers awaited a dip in prices.

Gold demand usually sees a jump in Kerala during the festival of Onam, but this year, the southern state is reeling from some of the worst floods in a century, leaving thou- sands displaced and causing damage of at least 200 billion rupees ($2.85 billion).

“Demand has taken a hit in Kerala. For the next few weeks, demand will remain sluggish there as people are focusing on building their damaged homes,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata. Dealers in India were charging a premium of up to $1.25 an ounce over official domestic prices this week, compared to a premium of $1 the last week. The domestic price includes a 10% import tax. Local prices have risen more than 1% in a week due to the depreciating rupee and that is prompting some jewellers to postpone purchases, said a Mumbai-based dealer with a private bank.

In the Indian market, gold futures were trading around 29,635 rupees per 10 grams on Friday, after falling to 29,268 rupees last week, the lowest level since 10 January.

Meanwhile, global benchmark spot gold prices hit $ 1,201.51 an ounce on Wednesday, its highest since 13 August.

In top consumer China, premiums rose to $6-$8 an ounce this week from last week’s $3 to $5, while premiums in Hong Kong were little changed at 90 cents-$ 1.40 versus 90 cents to $1.50 previously.