Key gold consuming nation India is seeing slack bullion demand and is trading at a discount to the international spot price, with scant evidence of any upside ahead of the approaching wedding season, HSBC said late Monday.
Senior strategist James Steel said in a research note that “despite the proximity of the gold buying season the Indian market is at a notable discount to world prices, indicating little import demand.”
Steel suggested that “this may be because of stellar imports in August. Nonetheless, reduced demand from a major buyer may limit gold’s upside.”
India’s recent elevated gold bullion imports are now being viewed with some skepticism as a barometer of true physical demand because the market remains in a solid discount to the international spot price, with talk of high domestic inventories.
One broker said market conditions are currently “very bad; there’s no demand at all.”
He said a variety of factors were weighing on sentiment, including high imports of refined bullion, hefty refining of gold in the country and a volatile spot price.
India Customs valued the country’s August gold imports at $4.958 billion.
“Using the average gold price for the month, this implies a total tonnage of 137.8 mt, up 69% on month and 178% on year,” Barclays said.
Platts Gold Premium India was assessed at minus $8/troy oz Monday, down $1 from Friday.
A discount of $7/oz was being heard nationwide so far Tuesday.
China, the world’s largest producer and consumer of physical gold, was heard in a premium of around $2/oz, down from $5-$6/oz in the middle of last week.
In a research note ICBC/Standard Bank strategist Tom Kendall said: “There is a chance Indian physical demand will pick up this week but if so it is unlikely to be sufficient to offset the absence of Chinese buyers, who will be on holiday from Thursday for seven days.”