A pick-up in buying demand for physical gold in India, the world's number two consumer of the yellow metal, was leading to tightness in the local Dubai market, sources said Tuesday.
Dubai is a major trade hub, with a fair amount of volume shipped to India.
Platts Gold Premium India was assessed Tuesday at plus $1/oz over dollar spot, from plus $0.50/oz Monday.
One banking source in India said he was finding it harder to source bullion from Dubai.
"In India good demand is there, in Dubai refiners don't have metal to offer," he said.
A refiner said he had heard of some shortage in Dubai Tuesday, "and that's why premiums in India have gone up by 50 cents."
A broker in Dubai disagreed, however, saying he had been offered metal at flat to the international price this week from a major refiner. He noted that if there was tightness then sellers would cash in by quoting at a premium to dollar spot.
An international banker said one reason could be a lack of 995.0 material available in the emirate, the purity choice of India.
"There may be an oversupply of 999.9 bars [favoured by the Chinese], and a shortage of 995.0. That could be one possible explanation," he said.
Two further brokers in Dubai said they had not seen any signs of a shortage.
One put the current discount at around minus $0.80-$0.50/oz to the dollar price. The Dubai discount has been fairly steady around flat to minus $1/oz year-to-date.
Spot gold was bid at $1,267/oz as of 1255 GMT Tuesday. The London Bullion Market Association Gold Price settled at $1,270.50/oz Monday afternoon.
A London-based banker said he was seeing some tightness, led by the uptick of demand from India.
"Dubai has always been a bit of a hub for metal out to India so Dubai trend tends to follow India. When there is demand in India, Dubai is one of the places they look to source," he said.
A broker said Indian demand had improved from a low base, but he hadn't seen local tightness in Dubai.
Gold sales totaled less than 650 mt last year in India, its lowest for seven years, and have been forecast to recover to 650-750 mt in 2017, according to a recent report by the World Gold Council.
The Indian gold market has been at a premium for most of 2017 so far, peaking at $2-$3/oz in February and averaging around $0.75/oz year-to-date.
