Gold prices in India at deep discounts on sluggish demand

By Rajendra Jadhav and A. Ananthalakshmi MUMBAI/SINGAPORE (Reuters) - Gold prices in major consumer India were quoted at deep discounts to the global benchmark this week on tepid demand and adequate levels of inventory, dealers said. Prices were quoted at a discount of $8 to $15 an ounce over London prices, much wider than the $1 discount in mid-June, they said. Persistent weakness in India, the world's top consumer of gold last year and the No. 2 buyer in the first quarter of this year, could add pressure on global prices, which are currently just above a 3-1/2 month low. Gold prices in India have fallen more than 3 percent in a fortnight, tracking losses in the global market. "The price drop failed to lure customers," said Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation. Two-thirds of India's gold demand comes from rural areas where jewellery is the traditional store of wealth for those with no access to formal banking. However, in the current monsoon season farmers in rural areas are spending on agriculture, leading to a decline in bullion demand. Lack of weddings and festivals are also hurting gold demand, dealers said. "Weak demand will remain for another month. From August onwards, jewellers will start restocking for the peak festival season at year-end," Bamalwa said. For the moment, though, inventory levels are more than adequate, dealers said. Strong imports earlier in the year have kept stock levels high, putting pressure on prices, they said. "There is a bit of inventory overhang due to higher imports in last few months," said a Mumbai-based bank dealer. "Inventory levels will come down in next few weeks as banks and others are making fewer overseas purchases." Elsewhere in Asia too, gold buying was subdued though prices were heading for their second straight weekly decline. Premiums in Singapore were between 80 cents and $1.20 an ounce, while in Hong Kong they were about 60 cents to $1. In China, premiums on the Shanghai Gold Exchange held at about $2 an ounce. A tight trading range, expectation of further price falls and a seasonally quiet demand period for bullion have kept consumers away from gold. "It has been an exceptionally long quiet period this year for physical demand," said a Singapore-based dealer. "In some parts of the region there are more sellers than buyers." Data from the Perth Mint on Friday showed though gold sales rose month-on-month, they were still much lower than last year's levels. The mint's gold sales fell 21 percent from a year ago, while silver sales were down 34 percent. (Editing by Subhranshu Sahu)