* Local gold prices rise to record highs in India
* Benchmark gold rates set for best week since August
* Lunar New Year demand may fall if prices remain high -analyst
By Karthika Suresh Namboothiri and Rajendra Jadhav
BENGALURU/MUMBAI, Jan 3 (Reuters) - Physical gold buying was subdued in major Asian hubs this week as a rally in prices dampened demand for the metal ahead of the Chinese New Year.
Gold reversed to discount in India, where futures were trading around 40,000 rupees per 10 grams on Friday, after hitting a record high of 40,116 rupees earlier in the day.
“The sudden price rise has surprised everyone. Buyers are waiting for a correction,” said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.
Dealers were offering a discount of up to $13 an ounce over official domestic prices this week, compared to a premium of $1 an ounce last week. The domestic price includes a 12.5% import tax and 3% sales tax.
“Jewellers have made decent purchases last month. They are now waiting for retail demand to pick up before buying more,” said a Mumbai-based dealer with a private gold-importing bank.
India’s bullion imports in 2019 fell 12% from a year ago to the lowest level in three years as retail buying faltered in the second half after local prices rallied to a record high, a government source said.
In top consumer China, premiums of $3.50 to $4.50 were being charged, compared with $4-$5 in the previous week. Traders in Hong Kong charged a premium of $0.30-$0.40, slightly higher than last week’s flat to $0.30 an ounce.
“I think demand will likely continue to fall, especially in China and India, due to higher gold price and poor consumption sentiment. The wild card, as always, will be investment demand,” said Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS.
Benchmark spot gold raced past the key level of $1,550 an ounce, and was set for its biggest weekly gain since early August. It rallied to a four-month high on Friday after a senior Iranian military official was killed in an air strike authorised by the United States.
“If prices move (higher), people will back away from buying, so we might see reduced demand this Chinese New Year,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers, adding demand could improve if prices retreated to around $1,500.
Demand generally picks up ahead of the Chinese Lunar New Year, which falls during the last week of January as gold is considered a popular gift during this period.
In Singapore, gold was being sold at the same price as the previous week, with a premium of $0.60-$0.80 an ounce being charged over the benchmark price.
Markets were closed this week in Japan for the Christmas and New Year holidays. (Reporting by Rajendra Jadhav in Mumbai and Sumita Layek in Bengaluru; editing by David Evans)