Discounts narrow as jewellers reopen shops after strike

Gold demand in India improved this week as jewellery retailers reopened stores after a strike, but the world's second biggest bullion market remained at a discount to the global benchmark as purchases across the region were curbed by higher prices.

Indian jewellers went on an indefinite strike since the start of March in protest over the reintroduction of a sales tax on gold jewellery after four years. They started opening shops from last week.

"Demand is better than last week, but it is lower than expected," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.

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"We were expecting retail consumers' rush as jewellery shops were closed for a long time. We couldn't see that kind of rush."

Dealers were offering a discount of up to $8 an ounce to the global spot benchmark this week, down from a discount of up to $25 last week. The discount hit a record high of $53 an ounce in late February on weak demand.

India's gold imports in March slumped 80.5% from a year ago to $973 million, the government said earlier this week.

"Gradually discounts will taper off and we could see market at parity or at premium by Akshaya Trititya," said a Mumbai-based bullion dealer with a private bank.

India will celebrate Akshaya Tritiya, the second-biggest gold-buying festival after Dhanteras, on May 9.

For now, a rally in global gold prices has kept buyers away.

The gold price hit a five-week high of $1,270.10 an ounce on Thursday, and was set to post a weekly gain of 1 percent. [GOL/]

Dealers said they were seeing some investment demand for gold, though not robust purchases.

"These prices are quite high for retail consumers so they are holding back," said a bullion dealer in Hong Kong.

"Banks and trading house are trying to reduce their gold inventory as there is no demand, so premiums are quite low," he added.

Prices in Hong Kong were at a premium of 50 cents an ounce to the global benchmark, their lowest since May 2015, traders said.

In top consumer China, premiums were steady at around $1 to $2 an ounce. Tokyo prices were on par, with dealers reporting little demand. Singapore premiums also held near 50 cents.