Gold Performance Affected as High Prices Dissuade Indian Gold Buyers

High domestic prices of gold have deterred the demand for the precious metal in India, affecting gold performance this week. Also, impacting the performance of gold is the uncertainty surrounding the geopolitical tension in Taiwan, prompting gold buyers in mainland China to put their huge purchases on hold.

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The gold prices in India lingered on an over three-month gold performance peak of 53,113 rupees per 10 grams last August 4. The demand for the precious yellow metal has slightly weakened over the last few weeks as major buyers are on a wait-and-see mode while a correction is being set. 

Huge discounts of up to $14 an ounce were even offered by dealers to encourage movement. The discount is over the official domestic prices – inclusive of the 15% import and 3% sales levies. Last week, the India International Jewelry Show managed to get huge orders. The organizers and jewelers were hoping that the festival season this year would be a good one.

Chinese premiums went down to $5 – $9 an ounce over the international spot prices. Last week, the price went from $4 to $11 an ounce.

Bernard Sin, the regional director of Greater China at MKS PAMP said that the tension between Taipei and Beijing is greatly affecting gold performance. He said that nobody is importing a large amount as everything remains unsure about the implications, especially with regards to China-US relations.

The amount of gold that enters China is controlled by the People’s Bank of China. This is done via quotas given to commercial banks. Hong Kong dealers offer gold with the benchmark to %2 premiums.

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Vincent Tie, of Silver Bullion from Singapore, said “We could see rising premiums for physical gold and silver for the rest of 2022.” Tie added, “while this could dampen demand in the short term, it would be easy for the consumer of these precious metals to overlook if a repeat of the 2020 price rally occurs again.”

Charged in this premiere Southeast Asian nation for premiums was between $1.50 and $2.30. 

Wholesalers, according to the managing director of GoldSilver Central, Brian Lan, slightly increased their purchases in anticipation of the upcoming festivals. Wholesalers will also have to ramp their production and pick up their range as the world opens up, economies improve and tourists visit, Lan further said.

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Drop in the United States Treasury Improved Gold Performance Friday

The price of gold slightly increased Friday due to a drop in United States Treasury yields. This set the price of the precious metal on the right path for the straight four weeks of gains, as investors get stock of the recent inflation data out of the US. 

Spot gold went up 0.5% to $1,798.86 an ounce as of 1800 GMT and was seen to be heading to a more than 1% weekly increase. The country;s gold futures also settled up 0.5% at $1,815.15

Bart Melek of TD Securities said that the gold market is currently seeing a short covering. He added that this is being supported by lower yields. The US Treasury yields went south after a volatile week as investors measured if an apparent slowdown in inflation increases could slow down the speed of Federal Reserve interest rate hikes.

Data that was released earlier this week showed that inflation in the country has slightly mellowed down following which market participants toned down expectations of an aggressive rate hike by the Fed. Recent commentary by the Fed continues to be hawkish and has stopped gold from going beyond the $1,800 level.

Melek also said that the precious metal’s rallied, after cooler CPI figures, stopped in their tracks as the market expects inflation will remain to be a huge issue. Even the Feds speakers are not enthusiastic and have even suggested that they cannot simply afford to relinquish their fight against inflation.

The gold performance tends to be doing good in a low-interest situation considering that it does not yield any interest.

“Risking risk appetite as seen through surging stocks and bond yields, have so far prevented gold from making decisive challenge at major resistance over the $1,800 level,” Ole Hanson said. Hanson is an analyst of Saxo bank.

And while gold performance seemed to have improved last week, it was a different story for soft copper. The price for copper fell Friday as the US dollar improved and lending in Chinese banks went down. However, copper prices may still improve and are seen to set $3 up as a prediction that the inflation in the US may have already peaked and this may have powered a broad shift towards riskier assets.

Aside from copper, prices for other industrial metals went down but managed to go up 1-5% this week after the inflation number suggested that the US Fed Reserve may have to have fewer interest rate rises, causing slight and fewer economic issues.

The London Metal Exchange (LME) showed the figure for copper at $8,103 per ton, down to 0.9% as of 1600 GMT. The price for copper, which is a primary material for power and construction, picked up by 16% from a low last July due to the worldwide economic slowdown. But the number still shows a 25% loss from its peak reported last March.

New bank lending in China went down twice as expected in July, data showed Friday. This is seen as a bad sign for the demand for metals. China is one of the biggest metal consumers. However, industrial production in Europe grew by up to three times. The figure is more than what analysts expected last June this year. 

Silver outperforms Gold Performance

Silver has recovered and improved, and is projected to outperform gold performance. This metal is highly speculative. Its performance shows that investors, trend traders, and especially speculators are moving money into silver and other precious metals. The September silver futures contract was pegged at $20.70 an ounce. The figure is higher than its mid-July performance.

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