Indian gold premiums low on demand deficit – traders – PHYSICALS

Aug 30, 2014 - 1:30 PM GMT

This is a delayed version of the report that appeared on FastMarkets’ subscriber-only website on August 28th 2014 – all information is correct as of that date. For access to FastMarkets’ exclusive premium content, please click here to request a free trial.

The Indian gold market is still facing a demand deficit, traders there told the Bullion Desk, leading to premiums remaining at low levels, even as the important third quarter continues to unfold.

“The market remains very quiet here. It seems a lot of money has been diverted away from gold and property and into equities,” one market watcher said.

Traders there put the current premium for physically delivered gold at $5-6 per ounce above London spot for one kilogram bars. This is significantly lower than where the premiums stood earlier in the year – at that time prices as high as $100 per ounce over London spot were not uncommon.

London spot was last at $1,292.10/1,292.90 per ounce, up $9.50 on the previous close.

The third quarter has traditionally been a very strong quarter for gold, with demand spurred by festival and weddings in India. India has until recently been the world’s largest consumer of gold.

Key to demand there is the monsoon season, with good rainfalls leading to solid farmer profits and thus higher rural gold demand.

After early predictions that India may suffer a rather severe drought this year, conditions have improved, with rainfall still below average, but not so much so that crop yields will be heavily affected, a local trader said.

In other locations, premiums have improved in recent weeks. Shanghai is now reported at $4 dollars above spot. A local trader said this was due to the seventh month – the month of the ghost – which is an inauspicious time to buy gold ending, and pent up demand being released.

Dubai is still trading near flat, reported at $0.50-1 over spot, and other locations, while Singapore and Hong Kong traded at $0.80/1, the traders said.

(Editing by Martin Hayes)