Gold price discounts in India jump to 6-month highs amid lockdown

Physical gold dealers struggled to meet surging safe-haven demand this week, especially in Singapore, as the coronavirus outbreak choked global supply chains, while massive discounts were offered in India amidst a lockdown.

In India, trading came to a standstill as the country went into a three-week lockdown to curb the spread of the virus, pushing discounts to their highest since mid-September, at $48 an ounce.

“Physical trade has stalled. There won’t be any movement for the next three weeks,” said Prithviraj Kothari, managing director of RiddiSiddhi Bullions.

Demand was nil even during the Gudi Padwa festival this week, he added.

Indian gold futures closed at ₹43,643 on Friday per 10 grams on Friday. The domestic price includes a 12.5% import tax and 3% GST.

“Discounts jumped on Thursday after prices rallied, but there was hardly any trade at those levels,” said a Mumbai-based dealer with a global trading firm.

In Singapore, premiums jumped to $1.20-$1.60 an ounce, but traders noted a sharp disconnect between spot and physical prices.

Retail and high net worth segment clients were looking to hold precious metals as a safe haven, said Brian Lan, of Singapore dealer GoldSilver Central.

Spot gold ranged between $1,484.65 and $1,642.39 an ounce this week.

Gold market participants remained concerned about a supply squeeze following a sharp divergence in London and New York prices, as the coronavirus closed precious metals refineries.

“Many dealers are taking orders and giving two-week timelines for actual delivery, but the physical price for small denominations is trading over $1,800, a significant premium to the spot market,” said Spencer Campbell, director at Precious Metals Consultants SE Asia Consulting in Singapore.

The uncertainty over prices, combined with lockdowns, kept activity muted in top consumer China, said Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong.

In China, gold was sold at discounts of about $10-$15 an ounce over the benchmark, while Hong Kong saw premiums of $0.20-$0.60.

Premiums of $0.50 an ounce were charged in Japan this week, a Tokyo-based retailer said, adding that however, domestic supplies should help the country see little impact from the refinery shutdowns, especially in Switzerland.

Courtesy: LIVEMINT