By Rajendra Jadhav and Sethuraman N R | MUMBAI/BENGALURU
Physical gold demand in Asia improved modestly this week as consumers returned to the market ahead of upcoming festivals in India and China when demand is usually high.
In India, the world's second biggest gold consumer, discounts narrowed as jewellers started buying for the festive season. Dealers were offering a discount of up to $52 an ounce over the global spot benchmark, down from up to $60 last week.
"Large jewellers have started building inventory for the upcoming festival season. In coming weeks, demand is expected to pick up further if prices remain stable at the current level," said a Mumbai-based bullion dealer with a global bank.
India's gold demand may rise in the second half of 2016 after falling to the lowest in seven years in the first half as monsoon rains spur rural demand during the peak festive season, the World Gold Council said on Aug. 11.
Two-thirds of gold demand in India comes from villages, where jewellery is a traditional investment.
The quarter ending in December typically accounts for about a third of India's gold sales since it includes the start of the wedding season and festivals like Dhanteras and Diwali, when buying gold is considered auspicious.
Bullion prices in top consumer China were at a premium of$1.50 an ounce to the global benchmark, almost unchanged from last week, dealers said. Premiums in Hong Kong were about 10 cents an ounce from 20-60 cents previously.
Steady premiums in China were due to an upcoming mid-autumn festival in September, which is typically a peak season for jewellery fabricators to build their inventories, said Zhirui Ji, an analyst with Thomson Reuters-owned metals consultancy GFMS.