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Reuters
Published
May 6, 2010
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Investors cash in on high gold prices; jewellers sidelined

By
Reuters
Published
May 6, 2010

By Lewa Pardomuan
SINGAPORE (Reuters) - Investors sold back some gold bars on Thursday 6 May as bullion prices held near this year's peak, while jewellers in main consumer India turned their back on the physical market despite the wedding season.


Photo: AFP

Premiums for gold bars slipped in Hong Kong but barely changed in Singapore, which suggested the selling was limited because of hopes prices could still rise further.

Spot gold rose $1.75 to $1,175.95 an ounce, within sight of this year's high around $1,191 an ounce hit on Tuesday 4 May. Gold was about 4 percent below a lifetime high above $1,200 struck in December last year.

"We've seen a two-way activity at around these levels," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, referring to a mixture of buying and selling in the physical sector. "Basically, we are still bullish on gold."

Gold bars were offered at premiums of 50 cents to the spot London prices in Hong Kong, down from 60 cents last week.

Gold has risen as much as 8.7 percent this year as fears the euro-zone debt crisis would spread beyond Greece sent the euro to its weakest in more than a year and spurred safe-haven buying.

But rising prices curbed demand in the jewellery sector, which accounted for around half of global consumption of bullion last year.

"When prices are higher, the physical buying is slow. May be, it's more of investment buying. That's why we can see the SPDR gold trust moving up quite high," said Wong Eng Soon, an investment analyst at Phillip Futures in Singapore.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust , said its holdings stood at a record of 1,166.002 tonnes as of May 5, up from 1,159.002 tonnes in the previous business day.

Premiums for gold bars hardly changed at 70 cents in Singapore, but dealers noted a steady flow of gold scrap from Indonesia and Thailand. Indian jewellers were absent, partly due to a weaker rupee.

"We continue to see sale of scrap. India has been slow this week. I guess the price is not right for them, although this month is supposed to be their festival season," said a dealer in Singapore.

The wedding season is underway in India, with gold-buying festivals such as Akshaya Tritiya slated in May. Gold jewellery is the most common gift at religious events in India, which accounts for 20 percent of global demand for gold.

(Editing by Himani Sarkar)

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