Gold Hits Record High, Yet Top 2 Markets Slump, Biggest Worry Emerges

The recent rebound in gold prices has almost offset the impact of India's reduction in import duties, and Switzerland's gold exports in August showed no signs of flowing to China, raising concerns that Asian demand may remain below seasonal standards in the fourth quarter.

According to Reuters, gold demand in India improved slightly this week but is still far below normal seasonal levels, as gold continues to trade near historical highs.

India is the world's second-largest consumer and a major importer of gold, but domestic demand remains sluggish due to local prices hovering near the historical high reached in July.

A bullion dealer in Hyderabad, a southern city in India, told the news agency: "Demand has been moderate for two days, but as prices rebound to near historical levels, demand loses momentum again."

This week, Indian dealers offered discounts of up to $17 per ounce from the benchmark domestic price, which includes a 6% import duty and a 3% sales tax.

Last week, gold traders offered discounts of up to $22 per ounce.

A dealer at a private gold-importing bank in Mumbai said that the global rise in gold prices almost completely offset India's recent reduction in import duties, and retail customers are once again being priced out.

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The situation in the world's number one gold market has not improved either.

The latest customs data from Switzerland shows that China did not import any gold from the world's largest gold refining and transit center last month, the first time since January 2021.

Chinese traders' discounts are also $14 higher than the global spot price, compared to a $10 discount last week, and in Hong Kong, gold is being sold close to the international benchmark.

Precious metals trader at Improved Company, Hugo Pascal, told Reuters that China's demand remains weak, affecting wholesale demand in Hong Kong.

According to Bloomberg, wholesale demand in mainland China has also been weak, and the World Gold Council pointed out that withdrawals from the Shanghai Gold Exchange in August fell by 37% compared to the same period last year.

Higher withdrawal rates are usually seen in August and September as jewelers increase inventory before the gold trading fair and the National Day holiday.

However, physical investment demand remains strong, with bars and coins continuing to attract buyers.

Data from the China Gold Association shows that jewelry purchases fell by 27% in the first half of 2024, but total demand only fell by 6%.

Song Jiangzhen, a researcher at the Guangdong South Gold Market Research Institute, told Bloomberg: "The decline in consumer demand for gold jewelry is mainly due to weakened income expectations.

The rise in gold prices has also hit consumer confidence, and most of them are waiting and hoping that prices will drop before they buy."

Meanwhile, according to a dealer based in Tokyo, in Japan, gold is being sold at a $1 discount, and the market is seeing more sellers than buyers at these prices.

Ross Norman, CEO of Metal Daily, said that customers are telling the market that bars are pricing them out.

He said: "Price sensitivity has returned in the Asian region, and they seem to be saying that gold is overpriced at the moment due to the inaction of buyers."

Singapore is an exception in the region, as some retail customers are still willing to pay a premium of up to $2.20 per ounce due to expectations of further price increases.

Spot gold hit a record high during Friday's trading session, just under $2620 per ounce.

Its last trading price was $2614.72, up 1.08% on the daily chart.