Wholesale gold bullion prices ended Tuesday morning in London at $1,655 per ounce, regaining ground lost yesterday to climb back to where it started the week, with dealers reporting signs of strong demand from India and China, the world's two biggest gold buying nations.
Silver climbed to $30.40 an ounce, slightly up on the week so far, while stocks and commodities also edged higher and US Treasuries fell.
The Shanghai Gold Exchange Monday reported record trading volumes equivalent to 19.5 tonnes for its Au9999 contract, which represents gold bullion of 99.99% purity. Tuesday's Au9999 volume fell to just under 9.3 tonnes, still significantly above the last year's daily average.
"Physical [gold] demand is very strong," one Beijing trader told newswire Reuters this morning. "It's a combination of the attraction of lower prices as well as pre-holiday demand." China celebrates Lunar New Year on 10 February this year.
Official customs data from Hong Kong meantime shows China imported 90.7 tonnes of gold from Hong Kong in November, a 91% increase from the previous month. The volume of gold flowing the other way rose 23% to 27.7 tonnes. Hong Kong is widely regarded as the major conduit for Chinese precious metals imports.
Premiums on gold bullion shipments to India hit a two-month high Tuesday, with dealers blaming a rush to buy gold before an expected import duty hike.
Gold shipped to India traded between $2 and $3 an ounce above London prices, dealers reported.
By comparison, premiums in Singapore this morning were around $1-$1.20 an ounce.
"Our physical desk has already noted significant interest from Indian clients looking for gold, which could push up imports until the tax in announced," says a note from Nick Trevethan, senior commodity strategist at ANZ.
"Nothing is available readily," adds one dealer at a bullion importing bank in Mumbai, adding that some shipments are taking up to a week to arrive.
Western investors meantime continued to add to their gold positions in December, according to data from BullionVault.
The Gold Investor Index, which tracks buying and selling on the world's largest online precious metals exchange, rose to a 12-month high in December.
Over in Japan, investment by pension funds in gold exchange traded funds could more than double over the next two years, according to Itsuo Toshima, pension fund advisor and former regional director Japan/Korea at the World Gold Council.
"Bullion's role as an inflation hedge, long ignored by Japanese fund operators, has come under the spotlight thanks to [Japan's prime minister Shinzo] Abe's economic policy," said Toshima Tuesday.
Following his election victory last month, Abe said the Bank of Japan should adopt a 2% inflation target, double the current targeted level, having previously called for unlimited quantitative easing during the election campaign.
"Gold may be a standard asset-class in the portfolio of Japanese pension funds as Abe's target is realized," said Toshima.