India's festive rush pushes gold premiums to over 10-year peak

Physical gold demand in major Asian markets was strong this week, even as prices smashed through multiple record levels with premiums in India reaching their highest level in over a decade ahead of major festivals this month.

Spot gold prices surpassed $4,300 per ounce for the first time on Thursday, gaining 7.6% this week amid renewed U.S.-China trade tensions and expectations of a U.S. rate cut.

Domestic gold prices in India hit a record high of 131,699 rupees per 10 grams this week. Indian dealers quoted premiums of up to $25 per ounce over official domestic prices, inclusive of import and sales levies, compared with $15 last week.

"The ongoing price rally is boosting investor interest in gold, even as jewellery demand remains weak," said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.

Jewellers were stocking up on small denomination coins and bars in preparation for the upcoming festival, said a Mumbai-based bullion dealer with a private bank.

Indians will celebrate the Dhanteras and Diwali festivals later this month, occasions when buying gold is considered auspicious and among the busiest gold-buying days in the country.

Gold smuggling into India has surged due to record-high prices and supply shortages, government and industry officials told Reuters.

Ordinarily, a retail run on investment gold might signal a mature rally, but almost every expectation around gold's price behavior seems to have been proven wrong, independent analyst Ross Norman said.

In top consumer China, bullion changed hands anywhere between discounts of $20 to $66 an ounce over the global benchmark spot price.

"The global enthusiasm for precious metals persists, and Chinese demand seems to have returned as well," said Hugo Pascal, a precious metals trader at InProved.

Meanwhile, "some people are selling jewelry as they want to take profit," said Peter Fung, head of dealing at Wing Fung Precious Metals.

Gold in Hong Kong was sold at par to a premium of $1.30, while Singapore saw prices ranging from a discount of $0.50 to a premium of $1.30.

"Dealers' inventories in Singapore continue to be depleted, as demand for the metals remains strong," Pascal said.

In Japan, gold was sold at a $1 premium over spot prices. "Investors don't seem deterred by high prices, they're just buying," a Tokyo-based trader said.