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Premiums for gold bars hit a record high in Asia on Wednesday as lower spot prices lured more buyers, mainly in China, the world’s second biggest consumer of the precious metal, amid tight physical supplies.
Premiums for gold bars in Hong Kong touched a new all-time high of $6 an ounce over spot London prices, up from $5 last week. Singapore premiums rose to $5.
Banks in China were quoting up to $7 in premiums, two traders in Singapore said.
“China premiums remain high because of a shortage in supply of the physical metal,” said a Hong Kong-based trader.
“Unless we see more supply coming into the market, or spot prices trading much above the current level, premiums will stay relatively high.”
Spot gold was up 0.9 percent at $1,387.8 by 0918 GMT on Wednesday, but still near two-year lows last seen in April, when bullion fell the most in 30 years on fears of gold liquidation by European countries.
Shanghai gold prices rose slightly on Wednesday to stand around $30 higher than spot gold, indicating strong Chinese demand.
Gold is seeing some renewed demand in China after falling on Tuesday for the eighth time in nine sessions. The metal is down nearly 18 percent for the year.
“In China, the premiums have improved over the last couple of days,” said a trader based in Singapore. “Demand for gold bars is really strong and there is a shortage at the moment.”
Chinese gold imports are likely to swell further, after more than doubling to an all-time high in March, the China Gold Association said this month.
KILO BARS SCARCE IN SINGAPORE
Singapore is also seeing a shortage of supply, pushing premiums to new highs of $5 from $3.50 last week.
“Currently, there are no kilo bars in the market,” said Brian Lan, managing director of GoldSilver Central Pte Ltd in Singapore, adding that 100-gram bars were also in short supply.
Supplies were also constrained in India, the world’s biggest consumer of gold, not so much because of strong demand but new curbs imposed by its central bank.
The Reserve Bank of India limited gold imports by banks on a consignment basis, except to meet genuine demand from jewellery exporters in a bid to reduce the country’s deficit.
