Gold bar premiums in Asia hit record highs

SINGAPORE (Reuters): Premiums for gold bars hit a record high in Asia on Wednesday as lower spot prices lured more buyers, mainly in China, the world’s second biggest consumer of the precious metal, amid tight physical supplies. Premiums for gold bars in Hong Kong touched a new all-time high of US$ 6 an ounce over spot London prices, up from US$ 5 last week. Singapore premiums rose to US$ 5.

Banks in China were quoting up to US$ 7 in premiums, two traders in Singapore said. “China premiums remain high because of a shortage in supply of the physical metal,” a Hong Kong-based trader said. “Unless we see more supply coming into the market, or spot prices trading much above the current level, premiums will stay relatively high.”

Spot gold was up 0.9% at US$ 1,387.8 by 0918 GMT on Wednesday, but still near two-year lows last seen in April, when bullion fell the most in 30 years on fears of gold liquidation by European countries. Shanghai gold prices rose slightly on Wednesday to stand around US$ 30 higher than spot gold, indicating strong Chinese demand.

Gold is seeing some renewed demand in China after falling on Tuesday for the eighth time in nine sessions.

The metal is down nearly 18% for the year. “In China, the premiums have improved over the last couple of days,” a trader based in Singapore said. “Demand for gold bars is really strong and there is a shortage at the moment.”

Chinese gold imports are likely to swell further, after more than doubling to an all-time high in March, the China Gold Association said this month. Singapore is also seeing a shortage of supply, pushing premiums to new highs of US$ 5 from US$ 3.50 last week.