Asian Demand Intensifies as India Returns to Paying Gold Premium

Gold held firm above the $4,100 per ounce level, with the spot price recording $4,139.96, amid signs of strengthening physical demand in Asia ahead of the festive season in India.

The People's Bank of China added gold for the twenty-third consecutive month, signaling that central banks continue to buy the metal at a steady pace. These purchases coincide with Shanghai gold prices rising above the Western spot price.

Calculated in dollars, the gold price in Shanghai reached a higher level than London's, with an import incentive of $22 per ounce, roughly triple the usual level. In India, traders sold gold at a premium of nearly $5.50 per ounce above official import costs this month—the first time in over three months—as consumers rushed to buy ahead of Dussehra and Diwali.

A report by Gold Tickers described central bank purchasing as part of a broader trend to diversify reserves away from the dollar, considering this official demand to be less price-sensitive, which provides support for the metal in the face of Western market pressures linked to Federal Reserve policy.

What Do These Terms Mean?

Price Premium: The difference a buyer pays above the global benchmark price, reflecting local demand strength or import costs.

Import Incentive: The gap between the price of the metal in the domestic market and its price abroad; when positive, it encourages traders to import more of the metal.

Exchange-Traded Fund (ETF): An investment fund traded on exchanges like stocks, which may track the price of gold instead of buying the physical metal.

Ounce: A unit of weight for precious metals equal to approximately 31.1 grams, used globally to price gold.