By Sethuraman N R and Rajendra Jadhav | MUMBAI/BENGALURU
Asian physical gold demand improved slightly this week as a correction in prices prompted consumers to buy for the upcoming festival and wedding season, with discounts in India narrowing to the smallest in three months.
The safe-haven bullion has shed about 1 percent this week after hawkish comments from Federal Reserve Chair Janet Yellen last week left the door open to a U.S. interest rate hike in September. Rate hikes increase the opportunity cost of holding non-yielding assets such as gold.
"There is a slight pick up in demand, but it is still very light. We are still seeing quite poor demand in key physical markets in South East Asia," said Cameron Alexander, an analyst with Thomson Reuters-owned metals consultancy GFMS.
"There are expectations that the prices might come down further if the Fed triggers a rate rise in September ... Until we see a significant leg-down in prices from current levels, we don't see a big uptake in demand."
In India, however, demand firmed.
"Sentiments have improved. Retail buyers have started making small purchases for Ganesh festival. Some buyers are even making purchases for weddings," said Kumar Jain, a jeweller in Mumbai. India celebrates the Ganesh festival next week.
Demand for gold is expected to strengthen further in the final quarter as India gears up for festivals such as Diwali and Dussehra as well as for the winter wedding season, when buying the metal is considered auspicious.