Indian Bar Premiums Rise To $2/Oz Due To Supply Squeeze

According to a Reuters report as webbed by the Economic Times, premiums for 1 kg gold bars are at their highest in over two years as firm demand meets a supply shortage.

"Some suppliers are now charging $2 (an ounce) as there is a big fight in getting supplies... If we place an order now, we get delivery only in 3-4 days," said a dealer with a state-run bullion importing bank in Mumbai....

The sudden spike has prompted traders to stock the yellow metal ahead of the wedding season and a slew of festivals in the coming months.

But lack of supplies in the domestic market have exerted upward pressure on premiums, as foreign sellers were unable to keep pace with rising demand.

"Traders are booking because market was not expecting that gold would break $1,340 (an ounce). There could be further buying if prices fall below $1,280," said the state-run bank dealer.

Premiums are expected to continue northward as refiners are unlikely to keep pace with rising demand from Asia.

"The refiners started the year with low inventory and now they are lagging in delivering goods by 8-10 days," said Pinakin Vyas, assistant vice-president with IndusInd Bank , which is also a large gold importer.

Demand was firm by hope that gold would rise after the Chinese New Year festival, which starts on Feb. 2 and lasts until the 16th. Premiums in Hong Kong and Singapore were also high, with a spike-up to $3 in the latter centre.