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Asia Gold-Physical demand lends support to market

HONG KONG: Gold was receiving support from physical buying in Asia in the face of pressure from official gold sales and producer hedging, traders said on Friday.

Physical demand was on the rise in line with other markets in Asia and since the region's financial crisis ended, Dick Gazmararian, executive vice president at HSBC Holdings, said.

"India is a consistent buyer. Gold at these levels is attractive and the economy is doing well," he said.

Spot gold was quoted at US$284.60/285.10 an ounce.

Gold fabrication demand in the Middle East was good and buying in Malaysia was returning to pre-crisis levels, Gazmararian said.

"Indonesia has turned around from being a net dishoarder two years ago to a consistent buyer as it replenishes what was sold," he said.

In Hong Kong there was buying this week when gold was below US$285 even though this is normally a slow season, traders said.

The premium over London prices ranged from 10 to 50 US cents. STEADY DEMAND IN SOUTHEAST ASIA

A trader in Singapore described demand in Southeast Asia as steady. The premium in Singapore was unchanged at 60 to 80 cents.

But gold was under pressure from central bank sales by Britain and the Netherlands while Switzerland was expected to begin selling shortly a whopping 1,300 tonnes from its reserves.

Gold failed to benefit recently from what would seem to be positive inflationary and other developments, a trader said.

"We are heading nowhere fast...Now everyone is staring the Swiss bank sales in the face and wondering what will be the impact," he said.

The market was in equilibrium and unlikely to move above US$300 for any sustained period, Gazmararian said.

"Over US$300 you would see more hedging come in. At these levels and below, there is good physical offtake," he said. "I really don't see much change in the next six to 12 months."-Reuters