Indian Physical Gold Demand Still Dormant; Asian Demand Slows

According to a Reuters India report, Indian traders have been holding off from buying gold because they're waiting for price declines.

"Buying has dried-up because prices have moved higher again," said Mayank Khemka, managing director with Khemka Group of companies.

On the other hand, somewhat higher prices have not elicited much selling from consumers.


As for Asian demand, it also dwindled as prices moved up - but that fade hasn't changed opinions about gold's long-term bull market. Again, buyers are waiting for dips.

"Inflation will not cool down very quickly because of wage increase in China. People have money in their pocket, and they don't want to keep it in the bank as interest rates are low," said a second Hong Kong-based dealer.

"We saw buying when gold dipped below $1,500 from China, India and Indonesia, but not much scrap selling as people are still bullish on gold."

Premiums for 1 kg bars in Hong Kong were steady, ranging from $1.20 to $1.70/oz.

Survey Of Asian Investors Show Gold Still Overshadowed By Equities As Inflation Hedge

Demand for gold in Asia is huge, but inflation-hedge demand for the metal is still being overshadowed by equities according to a Barclays survey.

According to investment bank Barclays Capital's survey equities are the most sought after hedge against inflationary pressures, while gold was the second most popular choice.

The survey covered clients of wealth management organisations with combined assets under management of over USD 5 trillion.

Equities continue to be the most recommended asset by wealth managers for the next six months to produce a global balanced-risk investor portfolio, it added.

Thanks to solid growth in the region, equities are still competitive with gold. Asian economies' relative immunity to stagflation raises a question: were stagflation to harry the Indian and Chinese economies, what would be the effect on gold demand? With respect to North America, the question's easy to answer: investors would tend to switch into gold. But, in Asia, increasing wealth is already shunted into gold. Stagflation would interrupt that ready source of demand.

Moreover, Asian central banks would likely tighten.

Thankfully, the question is hypothetical right now. Despite the allure of equities, gold still sells well when Asian growth and inflation coincide.

Premiums For Gold Bars In Asia Highest Since 2004

It's actually "at least 2004," since Reuters has only been tabulating data since that year. Premiums for 1 kg gold bars in Hong Kong are now at $4/oz, up from $3 last week.

Physical dealers have seen a pick up in demand in recent weeks ahead of the Lunar New Year later this week and the wedding season in India in February, although any increase in cash gold prices also triggered selling from speculators.

"There's a lot of interest from India, but it's just that we can't meet their demand. Everybody is snatching the available stocks," said a dealer in Singapore. "We are seeing some light selling from Thailand, but there's also buying at lower levels."

Premiums for gold bars in Singapore remained firm at $3 an ounce, also their highest since at least 2004, partly driven by demand from top consumer India ahead of the wedding season, when parents give gold jewellery to their daughters....

"My clients offered to buy gold bars at $5 premium, but I have no gold. Nowadays, gold is booked and sold even before they leave the refinery," said another dealer in Singapore.

"There's some selling back in the gold market, but the premiums are still high. I do see light selling by the Thais too, but one consumer just called to sell me back the gold in transit."

Although Chinese markets are closed for the New Year Festival, dealers still expect some stocking up in part of Asia where the markets aren't closed. The Indian wedding season is coming up.


This item makes for a notable contrast from shrinking investment demand. So far this year, investment has held the balance over physical buying - but the latter has provided a needed cushion to gold's falling price. Had the physical buying shrunk too, gold would have suffered an all-out correction.

Physical Buying Slows Down In Asia

According to a Reuters report webbed by the Economic Times, gold buying in Asia pulled back.

"Physical buying has started to slow down, after prices have gone up a bit," said a Singapore-based dealer, adding there were also some profit-taking trades.

"There is not much fresh buying, as people are not keen for delivery after the Lunar New Year."

So, yesterday's exitement did not translate into strengthened buying. The second paragraph of the excerpt indicates that some of the recent buying strength was due to seasonal factors - specifically, stocking up for sales in the Chinese New Year festival.