Gold discounts hit widest in three and a half months

Mumbai/Bengaluru, June 10: Gold discounts in India expanded to their widest in nearly three and a half months this week amid lacklustre demand elsewhere in Asia, with bullion’s recent rally dampening retail demand.

The safe-haven asset, which is highly sensitive to interest rates, has climbed almost 2% this week after weak US payrolls data and comments from Federal Reserve chair Janet Yellen undercut expectations of an imminent rate hike.

“Physical demand for gold has been quiet for the past two weeks. Most investors are on the sidelines and we are seeing more selling at the moment,” said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.

In India, the secondbiggest gold consumer, dealers were offering a discount of up to $46 an ounce to the global spot benchmark this week, the largest since February 26. Last week, dealers were offering a discount of $14.

“Consumers are very price sensitive. They are postponing purchases due to the recent rally in prices,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in Kolkata.

“Traditionally demand remains weak in June but we never witnessed such kind of a lull in the market.”

In rural areas, farmers are purchasing seeds and fertilisers, while urban consumers are spending on their children’s education, said Daman Prakash Rathod, a director at MNC Bullion, a wholesaler in Chennai.

Two-thirds of India’s gold demand comes from rural areas, where jewellery is a traditional store of wealth. Farmers typically start sowing crops with the arrival of monsoon rains in June, when most schools and colleges also start.

“Indian demand is expected to remain sluggish for the next few weeks unless prices correct steeply,” Rathod said.

The safe-haven asset, which is highly sensitive to interest rates, has climbed almost 2% this week after weak US payrolls data and comments from Federal Reserve chair Janet Yellen undercut expectations of an imminent rate hike