Gold buying picks up as price drops; Indian festive demand eyed

Hong Kong (Sept 5)  Asian gold demand picked up slightly this week as global benchmark prices hit a near three-month low, attracting bargain hunters, dealers said on Friday.

Premiums across major gold trading centers increased slightly. In top buyer China, local prices were $4-$5 an ounce higher than the global benchmark on Friday, compared with about $2 last week.

In Hong Kong, premiums were at about 80 cents to $1.20 an ounce, up from 70 cents to $1.10 last week. Singapore premiums were about $1.

Gold was trading near its lowest in nearly three months on Friday and was poised to post its third weekly drop in four, hurt by a strong dollar and an optimistic view of the U.S. economy.

"The current price level is good for physical buying because prices moved down sharply after a long period of stability," said one physical dealer based in Hong Kong.

Markets were eyeing holidays next week to see if it would buoy demand in China, the top importer of bullion. Chinese markets will be shut on Monday for the Mid-Autumn Festival, while Hong Kong will be closed on Tuesday for the holiday.

"We might not see robust buying even during the holidays because the anti-corruption campaign in China is hurting sales," said another dealer.

Beijing's anti-corruption campaign has brought down politicians and company executives in industries including oil, cars and healthcare, while also dragging down sales of high-end products.

Meanwhile, many in the market were optimistic about Indian buying in the near future with the upcoming Indian festivals and wedding season expected to boost demand.

India, the second biggest buyer of gold after China, will soon celebrate Dhanteras and Diwali festivals, when it is considered auspicious to buy gold.

The wedding season is also expected to boost demand for bullion. The precious metal forms an essential part of a bride's dowry in India, and is considered auspicious as a gift or offering at religious festivals.

"Gold demand is improving gradually and is expected to rise further in the coming months ahead of Diwali," said Ashish Pethe at Waman Hari Pethe Jewelers, a Mumbai-based jeweller.

"Sales during the first six months were weak but now it is likely to pick up," he said.

Gold premiums in India are currently at about $4-$5 an ounce, two dealers said, but is expected to increase soon.

Premiums could jump to $10-$12 an ounce, along with a jump in imports, the head of the country's biggest gold refiner said earlier this week.

Source:  Reuters