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HK's gold sluggish, Singapore premiums fall back

HONG KONG: Hong Kong's gold market had a sluggish week, trading within a range of US$393-398 an ounce, with some evidence of fallout from soaring U.S. commodity prices and the possibility of higher inflation in the United States.

"The trend is very steady this week," a gold dealer at a large bank said.

The trading week, shortened by the Easter Monday holiday, saw some initial short-covering following an 89-point slump in the Dow Jones Industrial Average in New York on Monday.

Towards the end of the week, people bought gold on marginally improved sentiment buoyed by an eight-year high in the U.S.-based Commodities Research Bureau index.

Upside resistance stayed at US$396-397, traders said.

Hong Kong traders said the local gold market had lost much of its shine as fund managers preferred currencies and equities. Sorely needed speculative interest would add sparkle, they said.

Singapore's gold premium fell during the week from recent highs to 50-60 U.S. cents an ounce over the London spot price on poor physical demand.

The premium hit the 60-cent high last month following a rush on gold in Taiwan prompted by China's war games and missile tests just off the island's coast.

"The 60-cent premium is at the top of gold's traditional premium band in Singapore of between 45 and 60 cents," a trader at a U.S. bank said.

"The premium has gone back to about 50-55 cents for wholesalers and 55-60 cents for retail market.

"Physical demand is not so fantastic. There is increasing supply of second hand scrap bars especially from Indonesia and that's why there is lower demand for kilo bars," he said.

Another said: "Some bars are coming back. When prices are high, they sell and vice-versa."

The Singapore traders said they expected demand to return if prices dipped to $390-$392 an ounce.

"Generally, physical players are looking at $390-$392 as a good buy and $400 a good sell," one said.

Singapore is a regional distribution centre for physical gold.

The island imports about 300 tonnes of the metal a year from refiners in Australia, Europe and other areas to supply to neighbouring markets such as Malaysia, Indonesia, Thailand, Burma, India and Sri Lanka.-Reuter