SINGAPORE (Commodity Online): With the arrivals of Indian jewellers in Singapore’s gold market fro purchases for the Diwali demand, gold demand has moved up her.
Jewellers in India entered the physical market this week despite gold’s rally to an 18-month high, reflecting expectations of further rises in prices ahead of Diwali, an auspicious occasion for Indians to buy gold.
Purchases by India, the world’s largest gold consumer, helped offset selling by holders in Indonesia and Thailand and kept premiums for gold bars steady at 50 to 70 US cents an ounce to the spot London prices in Singapore.
Gold hit a high of $1,017.75 an ounce, its strongest since March 2008, after the US dollar dropped to 2009 lows against the euro. Bullion has gained around 16% this year as investors sought a safe heaven due to the dollar’s weakness.
It seems the jewellery sector is covering some stocks. India’s gold demand normally rises between August and October, when consumers buy bullion for auspicious reasons to celebrate festivals which peak with the Diwali festival of lights next month. A strong rupee also helped local consumers cope with rising gold prices.
Weddings usually take place during the festive season, when parents give gold jewellery to their daughters for financial security. India accounted for more than 20% of global demand for gold jewellery in 2008
Another report has come out claiming August imports to have tripled to 21.8 tonnes as compared to the month before which were 7.8 tonnes. This raises a question, have the consumers finally accepted these price levels or has desperation driven them into the market? Last year August saw imports at a good 98 tonnes.
It does not seem like prices are going to cool after all and consumers are tired of waiting. Also, the forthcoming festivals are far more important and buying Gold is a tradition not many will be willing to break. Of course, each one would probably buy lesser than their usual quantity, but at least they will step from the sidelines to test waters.
India is still buying despite the high prices. Maybe they are afraid that prices will go up again.
Dealers have expected demand from Indonesia, the world’s most populous Muslim nation, to pick up during the Ramadan fasting month which culminates with the Eid al-Fitr festival later this month.
Instead, the physical market saw steady sales of scraps from Indonesia, which suggested that local dealers still had excess stocks because of poor demand earlier this year.
Gold prices are likely to correct after their current run above $1,000 an ounce, but may rebound to as high as $1,100 within the next six months if inflation fears grow, metals consultancy GFMS said.
In Hong Kong, gold bars were on par with the London spot prices, unchanged from last week, although there were also offers at 10 to 20 cents premiums.
