Asia gold: Chinese premiums slump to 3-1/2 year low as virus hits activity

By Harshith Aranya and Rajendra Jadhav
·2-min read
FILE PHOTO: Gold coins are displayed at Ginza Tanaka store in Tokyo

By Harshith Aranya and Rajendra Jadhav

BENGALURU/MUMBAI (Reuters) - Rising prices dented demand for physical gold in most Asian hubs this week, while the coronavirus outbreak dragged China's premiums to their lowest since July 2016.

Benchmark spot gold prices have risen over 3% so far this week, having risen to a seven-year high at 1,643.89 an ounce.

In India, prices soared to a record high, tracking gains in the overseas prices and in response to a weak rupee.

Gold futures hit an all-time high of 42,509 rupees per 10 grams on Friday. Futures have risen nearly 9% so far in 2020 after rising nearly a quarter in 2019.

"Demand is negligible. Retail buyers and even jewellers are not interested in buying at the current level," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.

Dealers were offering a discount of up to $7 an ounce over official domestic prices this week, up from $3 last week. The domestic price includes a 12.5% import tax and 3% sales tax.

In neighbouring Bangladesh, the country's jewellers' association increased prices for all types of gold, the second hike since January, citing uncertainty over the coronavirus epidemic.

The new rates, with the best quality gold priced at 61,528 taka ($728) per Bhori, or 11.664 grams, came into effect from Wednesday.

In China, gold was sold at anywhere between flat versus the benchmark to a premium of $1 an ounce, compared the $1 premium last week.

"China and Hong Kong are quiet. Price effect is minor, major effect is the virus," said Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong.

There have been more than 75,000 confirmed coronavirus cases so far in mainland China, with 399 new deaths reported on Friday.

"The (Chinese) jewellery industry will be back to work next week, so demand has been weak this week as well," said Samson Li, Hong Kong-based precious metals analyst at Refinitiv GFMS.

In Hong Kong, premiums narrowed to $0.30-$0.40 an ounce, versus the $0.30-$0.50 charged last week.

In Singapore, premiums of $0.50-$0.60 were charged, the same as last week.

"Demand has slowed as prices are way higher now. So we can see more customers selling as compared to buying," said Brian Lan, managing director at Singapore dealer GoldSilver.

"It's more of the price level than the virus."

In Japan, gold was sold from flat to a premium of $0.50 an ounce, unchanged from last week.

(Reporting by Asha Sistla in Bengaluru, Rajendra Jadhav in Mumbai, Ruma Paul in Dhaka. Editing by Jane Merriman)