India's gold market is experiencing unprecedented discounts, reaching an eight-month high, as domestic prices soar to record levels, significantly dampening consumer demand. This trend has led to a substantial decline in imports, marking a 20-year low.
In recent weeks, Indian bullion dealers have been compelled to offer discounts of up to $41 per ounce over official domestic prices, an increase from the previous week's $39 discount. This escalation corresponds with domestic gold prices hitting an all-time high of ₹89,796 per 10 grams earlier this week, reflecting a 15% surge since the beginning of the year.
The relentless climb in gold prices has led to consumer hesitation, with many opting to delay purchases in anticipation of potential price corrections. A New Delhi-based bullion dealer noted, "The price just keeps climbing with no break. Every week, it's hitting new highs. Customers are just sitting back, waiting for a dip."
Reflecting the subdued demand, India's gold imports are projected to plummet by 85% in February compared to the same period last year, reaching the lowest levels in two decades.
The trend of reduced demand is not confined to India. In China, gold traded at discounts ranging from $2 to $16 under spot prices, indicating a significant tapering in local demand. The China Gold Association reported a 9.58% year-on-year decline in gold consumption for 2024, totaling 985.31 metric tons, with gold jewelry purchases dropping by 24.7% to 532.02 tons.
Conversely, institutional demand for gold ETFs in China remains robust, and the central bank continues its gold accumulation, albeit at modest reported levels.
In other Asian markets, Singapore saw gold trading at a premium of $1.80 to $2.50 per ounce, while dealers in Hong Kong charged premiums between $0.50 and $2 per ounce.
The current scenario underscores a significant shift in consumer behavior in major gold-consuming nations, influenced by soaring prices and economic uncertainties. The sustained high prices and corresponding discounts may continue to suppress demand, impacting global gold trade dynamics in the foreseeable future.