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Rising gold prices have significantly dampened demand for physical gold across most Asian markets this week. In India, domestic gold prices reached an all-time high of ₹80,034 ($927.69) per 10 grams on Friday, driven by international spot gold prices hovering near a record high of $2,790.15.

“Retail demand was negligible this week due to the price rise. Most jewellery stores were witnessing thin footfall,” a Chennai-based bullion dealer told Reuters on Friday. To stay competitive, Indian dealers offered discounts of up to $38 an ounce over official domestic prices, a significant increase from the $30 discount offered last week.

Jewellers are adopting a wait-and-see approach, speculating that the government might change the import duty structure in the next week’s annual budget. Finance Minister Nirmala Sitharaman will present the next fiscal year’s federal budget on Feb. 1, following a significant import tax cut on gold in the previous budget.

In China, dealers offered discounts of $10 and charged a premium of $10 per ounce above international rates. Despite high prices, some consumers are still buying gold due to the upcoming holiday season. In Hong Kong, gold was sold at par with a $2 premium, while in Japan, bullion was sold from a discount of $1 to a premium of $1.

“Trading houses hesitate to purchase gold with rates increasing,” said a Tokyo-based trader. The surge in gold prices has been driven by various factors, including safe-haven demand stemming from uncertainty surrounding US President Donald Trump’s trade policies and a softer dollar.

Speaking from Washington to the World Economic Forum in Davos, Switzerland, Trump demanded that central banks across the globe lower interest rates. This statement has sparked concerns about the potential impact on the global economy and the gold market.

In the midst of these developments, gold prices continue to hover near record highs, making it increasingly challenging for Asian buyers to purchase the precious metal. As the market awaits the Indian government’s annual budget announcement, investors and jewellers remain cautious, expecting potential changes to the import duty structure.

The ongoing tensions between the US and Iran, coupled with the spread of the coronavirus, have also contributed to the surge in gold prices. As the situation continues to unfold, market analysts predict that gold prices may remain volatile, influencing demand in Asian markets.

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