BENGALURU/MUMBAI, Dec 7 (Reuters) – Demand for physical gold picked up slightly in most Asian centres this week as prices fell, but a drop in local rates to four-month lows failed to lure buyers in India even amidst the key wedding season.

Spot gold rates were on track for a weekly decline of about 2 percent amid expectations of an interest rate hike by the U.S. Federal Reserve.

Gold is highly-sensitive to rising interest rates, as these tend to boost the dollar, in which the metal is priced.

“Demand has picked up across Asia. However, the buying is not that great. Expectations are that if U.S. interest rates are raised, gold may test below $1,250 an ounce, and that may count as a prospect of buying,” a Singapore-based dealer said.

In top consumer China, demand picked up slightly as holidays approached, traders said, with gold fetching a premium of $6-9.50 an ounce over benchmark rates, versus $5-$8 last week.

“Last year, we saw huge premiums during this same period, at about $20. It is now around the $7 level, which means demand is just ‘okay’,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Premiums in Hong Kong were at 70 cents-$1.30 per ounce, compared with $1-$1.80 in the previous week, while in Singapore, premiums were between 70 cents and $1 as against last week’s 50-90 cents level.

In Japan, prices of gold shifted to a premium for the first time in over four months due to the price drop and on increased buying ahead of holidays, a Tokyo-based trader said.

Meanwhile, in India, demand remained subdued despite the ongoing wedding season. Gold is considered an essential part of weddings in India and is a popular gift for special occasions.

“Wedding season is going on but that is not supporting retail demand. Many buyers are just replacing old jewellery for new,” said Kumar Jain, a Mumbai-based jeweller.

“Buyers are waiting for prices to come down to 28,000 rupees.”

Local gold prices fell to 28,755 rupees per 10 grams on Thursday, the lowest level since Aug. 9.

Dealers in India were offering a discount of up to $3 an ounce this week over official domestic prices, compared with $1 discount last week.

Jewellers are not replenishing inventory as they expect a sharp correction in prices after the U.S. Fed meeting, said a Mumbai-based dealer with a private bank.

India’s gold imports in November nearly halved from a year ago, industry officials and analysts said.

(Reporting by Arpan Varghese and Rajendra Jadhav; Additional reporting by Apeksha Nair; Editing by David Evans)

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