* China curbing gold imports in bid to limit yuan outflow
* China gold premiums surge to over $40/oz this week
* India discounts narrow to up to $3 vs $5 last week
By Sethuraman N R and Rajendra Jadhav
BENGALURU/MUMBAI, Dec 16 Gold premiums in China
surged to their highest in nearly three years this week on fears
of limited supply of the metal, while demand in India remained
weak amid low prices due to a severe cash crunch following the
government's demonetisation move.
The supply shortage, traders said, was due to Beijing's
efforts to restrict import licenses.
The import curbs may be part of China's efforts to limit
yuan outflows after the currency's slide to its weakest in more
than eight years, traders said.
China allows only 13 banks, including three foreign lenders,
to import gold, according to the Shanghai Gold Exchange.
"The drag on supply is having an impact on pricing," said
Cameron Alexander, an analyst with Thomson Reuters-owned metals
Gold premiums in China against the international benchmark
rose to over $40 an ounce this week, the highest since
January 2014, according to Thomson Reuters data. Last week,
premiums were quoted around $28-$30.
"The Spring festival next year is happening a bit early and
we have seen some modest demand for jewellery making," said
Jiang Shu, chief analyst at Shandong Gold Group.
Meanwhile, gold discounts narrowed in India as prices
dropped to their lowest in 10-1/2 months, but demand remained
weak due to cash crunch and fears the government might restrict
Dealers in the world's No.2 consumer of the metal were
offering a discount up to $3 an ounce this week over official
domestic prices that include a 10 percent import tax. Last week,
they had offered a discount of up to $5.
"Many retail consumers are not buying. They think the
government might bring new law to limit how much gold people can
hold," said Ashok Jain, proprietor of Mumbai-based
wholesaler Chenaji Narsinghji.
"They are waiting for this demonetisation process to get
over before making big purchases."
The government had clarified earlier this month that "there
is no limit on holding of gold jewellery or ornaments."
Last month, Prime Minister Narendra Modi scrapped 500- and
1,000-rupee banknotes, or 86 percent of the value of cash in
circulation, as part of a crackdown on corruption, tax evasion
and militant financing.
The move hit wedding season demand after the end of key
festivals such as Diwali, dealers said.
Local gold prices fell to 26,901 rupees per 10 gram
on Thursday, the lowest since Feb. 2, 2016.
"Usually whenever prices drop by 2,000 to 3,000 rupees (per
10 grams), Indian consumers buy aggressively. This is an unusual
time. The correction failed to generate demand," said a
Mumbai-based dealer with a private bank.
In Hong Kong and Singapore, sellers offered premiums of up
to $1.50 an ounce. Discounts in Tokyo remained at 50 cents.
(Reporting By Nallur Sethuraman in Bengaluru; Editing by