Short Description:
Gold premiums in India and China surge to multi-year highs on strong investment demand and speculation of import duty increases, defying record global prices.
Read Time: 3 minutes, 15 seconds
Surging Gold Premiums in Asia Signal Diverging Demand Despite Record Global Prices
The gold market is witnessing a fascinating split as physical premiums in key Asian markets soar despite global spot prices touching a record near $5,600 an ounce this week. This unusual dynamic highlights powerful local factors currently outweighing lofty international rates. In India, gold premiums charged by dealers jumped to a decade-high of up to $121 per ounce over the official domestic price. This surge is driven by strong investment demand and widespread speculation that the upcoming Union Budget in February will reintroduce higher import duties. Finance Minister Nirmala Sitharaman had slashed duties last July, but investors are now rushing to buy ahead of a potential reversal, pushing domestic prices to a record high of over 180,779 rupees per 10 grams.
Simultaneously, premiums in China have skyrocketed, reaching up to $32 an ounce from just $8 last week. A pickup in jewellery demand ahead of the Lunar New Year, combined with bullish investor sentiment following gold’s break above the $5,000 psychological barrier, is fueling this demand. As Peter Fung of Wing Fung Precious Metals notes, while some are selling old jewellery to capitalize on high prices, robust buying interest from smaller investors persists. This is a significant indicator, as jewellery purchases in China often represent long-term investment, suggesting deep-seated confidence in the metal’s value despite its elevated cost.
The backdrop to this regional frenzy is a record global gold price and extreme market volatility. International spot gold is headed for its best month since January 1980, with investors globally seeking a safe-haven asset amid lingering geopolitical and economic uncertainties. This has created a unique situation where retail jewellery buying in some markets, like India, has been stifled by price volatility and a weak local currency, yet investment-driven premium demand remains incredibly strong. Meanwhile, other Asian hubs like Singapore and Japan saw relatively stable premiums, underscoring the specific, intense pressure in the world’s two largest gold-consuming nations.
Short Summary:
Gold premiums in India hit a decade-high on budget duty hike fears, while China’s surged on Lunar New Year and investment demand. This regional strength contrasts with suppressed retail jewellery buying due to record-high and volatile global prices. The trend underscores gold’s dual role as a cultural staple and a sought-after safe-haven asset, with Asian markets driving physical demand irrespective of international spot prices.
