By Market Insight Desk
The Asian gold market showed a sharp regional split this week, as India’s physical market slipped into its deepest discount in nearly a decade, while China experienced a surge in safe-haven demand driven by geopolitical tensions in the Middle East and continued central bank accumulation.
India Discounts Widen Sharply
Bullion dealers in India offered discounts of up to $83 per ounce over official domestic prices this week—levels not seen since July 2016. The discount widened dramatically from around $28 last week, signaling weak retail demand and cautious buying by jewellers.
Market participants say seasonal factors are weighing on the market. Many jewellers are currently closing their books ahead of the financial year-end, limiting fresh purchases of bullion and contributing to softer demand.
Analysts also point to a growing arbitrage in import channels. Under current rules, gold imports attract a 6% duty, while platinum-studded jewellery can enter the country duty-free.
“Some importers are declaring gold as platinum-studded jewellery at customs even though it contains more than 90% gold,” said a Mumbai-based bullion dealer. “This allows them to bring in metal duty-free and sell it at steep discounts in the domestic market.”
The practice is adding additional supply pressure to an already weak market.
China Premiums Rise on Safe-Haven Demand
In contrast, China—the world’s largest gold consumer—saw physical gold premiums climb to $20–$30 per ounce above global benchmark prices, up from $13–$15 last week.
The rise reflects strong safe-haven buying by investors and retail buyers as geopolitical risks intensify.
“Physical demand remains strong because of the conflict in the Middle East. Investors continue to buy gold as a safe-haven asset,” said Peter Fung, head of dealing at Wing Fung Precious Metals.
Supply constraints are also supporting the premium. Market participants noted that no new import quotas have been issued in March, limiting the inflow of physical metal into the domestic market.
“The PBOC’s dual strategy—steady reserve accumulation combined with tight quota control—keeps the domestic market resilient yet constrained,” said Bernard Sin, regional director for Greater China at MKS PAMP.
China’s central bank extended its gold buying streak to a 16th consecutive month, reinforcing long-term support for the metal.
Regional Premium Snapshot
Elsewhere in Asia, premiums were relatively modest:
Market Outlook
The divergence between India and China highlights the regional drivers shaping the global gold market.
While India’s near-term demand remains subdued due to seasonal factors and pricing distortions, analysts believe China’s safe-haven demand and central bank buying could provide stronger structural support for gold prices in the months ahead—especially if geopolitical tensions persist.
Market Insight:
Short-term physical flows suggest Asia’s gold demand is shifting eastward, with China emerging as the dominant driver of physical buying while India’s market temporarily softens due to regulatory arbitrage and seasonal demand cycles.
Frequently Asked Questions
Why are gold prices trading at deep discounts in India?
Gold discounts in India widened due to weak retail demand, jewellers closing financial year accounts, and increased supply. Some traders are also importing gold through duty-free platinum jewellery channels, allowing them to sell metal at lower prices in the domestic market.
Why is gold trading at a premium in China?
Gold in China is trading at $20–$30 per ounce above global prices because of strong safe-haven demand, limited import quotas, and continued gold purchases by the People’s Bank of China (PBOC).
How do import duties affect India’s gold market?
India imposes a 6% import duty on gold, along with a 3% sales levy, which usually pushes domestic prices higher. However, alternative import classifications—like platinum-studded jewellery—can bypass these duties and create price distortions and market discounts.
How do geopolitical tensions affect gold demand?
Rising global tensions—such as conflicts in the Middle East—often increase safe-haven demand for gold. Investors and households buy gold to protect wealth during uncertainty, which can push prices and premiums higher in some regions.
What does the divergence between India and China mean for the global gold market?
The contrast shows shifting physical demand flows in Asia. While India currently faces temporary demand weakness, China’s investment demand and central bank buying could continue to support global gold prices in the medium to long term.
