Gold prices in top consumer India swung to a premium to the global benchmark this week, compared with discounts late last month, as jewellery demand picked up, a report said.

Indian gold prices were at a premium of $2-$3 an ounce over the international benchmark and are expected to remain in the same range in the short term, according to trade sources, reported the Gulf Daily News, our sister publication.

Prices were at a discount of up to $16 an ounce last month, due to weak demand and sufficient supply in the market.

'Wedding demand has started picking up at lower prices,' said Narendra Singh, owner of Kiran Jewellers in Jaipur.

'Presently supply is smooth and gold is available as per the requirement but imports may increase in the coming months on increased demand,' he said.

India overtook China as the top gold consumer last year as jewellery demand jumped to a record high, World Gold Council data showed this week.

Gold is a popular gift at weddings in India, and is also bought for auspicious occasions.

Sustained strong demand in the top consumer could support gold prices, currently trading just above five-week lows.

Strong purchases in China ahead of the Lunar New Year holiday next week could also underpin prices, though traders warned that sales were still lower compared to last year.

'Sales of jewellery and small gold bars are good but demand is probably slightly lower than last year's levels,' said a trader at one of the importing banks in China.

Chinese consumers have recently been quite cautious in gold purchases, following record buying in 2013, when prices had slid sharply by 28 per cent. A cautious price outlook and an anti-graft drive have kept some buyers away.

Premiums on the Shanghai Gold Exchange were steady at $3 to $4 an ounce this week. This compares to premiums of about $10 and above ahead of the 2013 new year holiday, which fell on January 31 last year.

'Short-covering may lift gold for the time-being, but post Chinese New Year, we could see gold taking a tumble again,' said Howie Lee, analyst at Phillip Futures. The firm expects gold to test $1,200 an ounce by the end of the first quarter. – TradeArabia News Service