There were some very slim indications of physical gold pick-up in parts of India this week, with many hoping for a return to life in the market heading into September, although any sales were for small quantity as the world's number two consumer continued to grapple with the worst year of business in living memory, sources said.
One broker in Delhi said earlier this week that he was sensing some up-lift in otherwise dire sentiment, and had sold small amounts but would not confirm volume nor destination.
Everyone else continued to bemoan the "woeful" conditions, with one refiner telling S&P Global Platts that the market remained "dead".
This week the Platts' India Gold 995 assessment has averaged minus $25/oz, against dollar spot.
One banker said that "[for] India I'm pretty sure you can just pick a number and it'll make sense."
At points in July the discount was assessed as deep as minus $65/oz.
One importer said that the lack of demand was leading to a continued stock build across the value chain.
A broker in Mumbai said that he saw no signs of pick-up in demand, a logistics source agreed.
"There's still no business, people are hopefully it should start again soon," he said.
One jeweler in the south said that he believed that the market should return to parity against dollar spot come September.
"I guess in a week of so time things will be better. Scrap availability is getting a little scarce, this will drive the market to parity [in my view]."
Earlier this week modest demand was reported in Chennai and Hyderabad; with a discount of minus $20 heard in the market. No sales were confirmed to support this.
A fund manager said that from where he sits there are some signals of a return to life for the India physical market, albeit from a low base.
A banker in Mumbai agreed, "[conditions are a] little better, [but] it will take time."
A second banker in the city agreed, "I am hearing discounts are improving and sentiment as well."
PGPI was assessed at minus $25/oz August 18.
Looking at other physical gold hubs; China, the world's number one consumer, has been heard between a premium of $2-$2.5/oz this week with Dubai between a discount of minus $1.8-$2.5/oz.
"Both India and China are behind the numbers this year [compared to historical demand figures]," said one European banker.
India is traditionally a 800-900 mt/year import market, year-to-date the country has imported roughly 123 mt only.
The banker noted that if it wasn't for such solid exchange traded fund demand in Europe and US the market would really be on its knees.
Still, Commerzbank pointed out that 1.3 mt of gold flowed out of ETF products Thursday. In reality this is a drop in the ocean compared to net inflows so far in 2016.
According to last count, total net global gold ETF inventory stood at 2,028 mt or 65.2 million oz as of August 18.
ETFs hit a record high of 84.6 million oz at the end of 2012.
Tom Kendall, strategist at ICBC Standard Bank, said that, "gold remains technically very strong and continues to attract large investment inflows into ETFs and bars and coins. It increasingly appears that $1,400 is a matter of when, not if."
The dollar price was spot bid at $1,347/oz as of 0905 GMT Friday.
