When financial investors aren’t buying, “the physical market becomes increasingly important in setting the floor for prices”, said Suki Cooper, a precious metals analyst at Standard Chartered Bank. “The gold price floor is starting to look well cushioned.”

Gold rings inside a store in India. ​Jewellers see the current sales momentum lasting until May. Photo: Bloomberg 
Spot gold dropped 0.9 per cent to US$1,729.60 an ounce on Monday. Earlier this month, its price fell below US$1,700 to the lowest since June, prompting more buying from consumers who were deterred by prices reaching a record of US$2,075.47 in August.

​Jewellers in India see the momentum lasting until the auspicious gold-buying day of Akshaya Tritiya, an annual spring festival of the Hindu and Jain religions, in May. Kumar Jain, owner of UT Zaveri store in Mumbai, expects his sales to almost double in the January-March period from a year earlier, and is optimistic about the coming quarter, too.

A woman buying gold on the occasion of Akshaya Tritiya, an annual spring time festival of the Hindus and Jains. Photo: Getty Images

“We have seen the best demand in the past month since the virus fear emerged in March last year, as customers came out to buy for weddings thinking prices will go up further,” he said.

A cut in import duty has also made the precious metal cheaper in India, which imports almost all the gold it consumes. Early estimates show gold purchases surged to the highest since late 2019 in February.

In China, gold jewellery consumption is set to grow 28 per cent in 2021, with most of the bump in the first quarter as the post-Covid-19 recovery runs out of steam and prices rally later in the year, research consultancy Metals Focus said in a report earlier this month.

A gold Buddha for sale in Shanghai. In China, gold jewellery consumption is set to grow 28 per cent in 2021. Photo: Shutterstock

Jewellery sales at big urban retailers more than doubled during the Lunar New Year holiday compared with last year, according to Zhang Yongtao, secretary general at the China Gold Association. That has pushed the local market to largely trade at a premium since mid-January, which hasn’t happened since February 2020, said Standard Chartered’s Cooper.

Bullion dealers say premiums on kilobars have also been increasing in Singapore, Hong Kong and Thailand since February.

That is probably because of the scrap market coming to a standstill after gold prices dropped, which meant refiners are struggling to get material to make enough gold bars, said Joshua Rotbart, founder and managing partner at bullion house J. Rotbart & Co.

“Having said that, there is no real stress in the market and definitely premiums are not at all-time highs.”