Gold demand across Asia presented a mixed picture this week, with Indian buyers remaining cautious due to sharp price fluctuations, while China’s gold market stayed resilient thanks to continued purchases by the country’s central bank.

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International spot gold prices declined to a two-week low after posting gains of more than 2% in the previous week. In India, domestic gold prices also eased to around Rs 1,44,800 per 10 grams on Friday after touching Rs 1,48,069 per 10 grams last week.

Indian Buyers Wait for Lower Gold Prices

Jewellers and bullion dealers reported that retail demand in India weakened as consumers delayed purchases in anticipation of further price corrections.

According to market participants, many customers are choosing to postpone fresh buying until gold becomes more affordable, reducing overall trading activity in the country’s largest bullion markets.

Gold Discounts Expand Across Indian Market

Reflecting the slowdown in demand, bullion dealers offered gold at discounts of up to 19 dollar per ounce over official domestic prices, which include India’s import duty and sales tax. A week earlier, the market had seen premiums of up to 5 dollar per ounce and discounts of only 7 dollar per ounce.

The wider discounts indicate that dealers are attempting to stimulate demand in a market where buying interest has weakened considerably.

Jewellery Exchange Dominates Retail Activity

Bullion traders noted that most retail transactions currently involve customers exchanging old jewellery for new pieces instead of making outright purchases.

Because of slower fresh demand, jewellers have reduced their purchases from banks, resulting in lower inventory replenishment across the market.

China’s Central Bank Continues Gold Buying

In contrast, China’s gold market remained relatively stable. Gold traded between a 1 dollar discount and a 5 dollar premium over global spot prices, reflecting balanced physical demand.

The People’s Bank of China (PBOC) added approximately 480,000 ounces of gold to its reserves in June, marking its 20th consecutive month of gold purchases. The country’s total official gold holdings increased to 75.44 million ounces, representing the largest monthly increase in more than two and a half years.

Analysts say continued central bank buying has helped provide stability to global gold prices despite recent market volatility.

Hong Kong Strengthens Its Position as Gold Trading Hub

Hong Kong introduced a new central clearing system for gold this week and resumed U.S. dollar-denominated gold futures trading. The initiative is aimed at strengthening the city’s role as a regional precious metals trading and reserve hub.

Gold in Hong Kong traded between a 1 dollar discount and a 1.70 dollar premium, while in Singapore premiums ranged from a 1 dollar discount to a 2 dollar premium. In Japan, bullion traded at a modest 0.40 dollar discount.

Market Outlook

Traders believe near-term gold demand in India will largely depend on price direction. If prices continue to soften, retail buying could improve ahead of upcoming festive and wedding seasons. Meanwhile, steady official-sector purchases from China continue to provide underlying support for the global gold market.

FAQ’s

1. Why have gold discounts increased in India this week?

Gold discounts widened because retail demand weakened as buyers postponed purchases amid sharp price fluctuations. Dealers offered larger discounts to attract customers and reduce excess inventory as fresh buying activity slowed across major bullion markets.

2. Why are Indian consumers delaying gold purchases?

Many buyers expect gold prices to decline further after recent volatility. Instead of purchasing immediately, consumers are waiting for more attractive price levels, resulting in weaker retail demand and lower trading volumes.

3. How much gold did China’s central bank purchase in June?

The People’s Bank of China added approximately 480,000 ounces of gold to its reserves in June, marking its largest monthly increase in more than two and a half years and extending its continuous buying streak to 20 months.

4. How is China’s gold buying affecting the global market?

China’s continued accumulation of gold reserves provides steady official-sector demand, which helps support global bullion prices during periods of market uncertainty and offsets weaker physical demand in some other regions.

5. What is the outlook for gold demand in Asia?

Market participants expect demand in India to improve if gold prices decline further, particularly ahead of the festive and wedding season. Meanwhile, sustained central bank purchases in China are likely to remain an important source of long-term support for the global gold market.

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