By Rajendra Jadhav and Karthika Suresh Namboothiri
MUMBAI/BENGALURU (Reuters) - Demand for physical gold in India rose this week as jewellers stocked up for a major exhibition, allowing dealers to cut discounts to the lowest in two months, while the Lunar New Year holiday kept activity subdued in other major Asian hubs.
Dealers in India, the world's second biggest gold consumer after China, were offering discounts of up to $1.5 an ounce over official domestic prices, the lowest since the second week of December, as against $4 discounts last week. The domestic price includes a 10 percent import tax.
Demand improved as jewellers made purchases for next week's exhibition, said Mukesh Kothari, director at bullion dealer RiddiSiddhi Bullions in Mumbai, referring to the India International Jewellery Show that kicks off in India's financial capital on Sunday.
Earlier this week gold prices in India jumped above 34,400 rupees ($482.65) per 10 grams, not far from a record high of 35,074 rupees hit in August 2013. Local prices have jumped more than 13 percent in the past six months.
The rally has, however, been prompting many retail consumers to postpone purchases, said a Mumbai-based dealer with a bullion importing bank.
"Some retail consumers are selling gold instead of buying. They are cashing in on higher prices," the dealer said.
Scrap gold supplies in India may increase this quarter as a rally in local prices has prompted consumers to sell old trinkets and jewellery.
Markets in China were closed for the entire week for the Lunar New Year.
Customer business was "less than normal" this week across much of Asia because of the holiday, said Gregor Gregersen, CEO of Singapore retailer Silver Bullion Pte Ltd.
"However, in the run up to the holiday, there was considerable activity in products such as the 'Lunar Year of the Pig' bullion coins and other bullion products for gift-giving."
Activity was subdued in Singapore and Hong Kong as well.
"There is some retail buying, but jewellers and wholesalers are closed," said Brian Lan, managing director at dealer GoldSilver Central in Singapore.
Premiums of around 80 cents were being charged over the benchmark in Singapore, unchanged from the previous week, Lan said.
International benchmark spot gold prices were on track for their first weekly decline in three, but were still supported above the $1,300 an ounce level.
In Hong Kong, premiums of 50 cents-$1.20 were being charged, said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
In Japan, dealers offered discounts of about 50 cents for a second week, a Tokyo-based trader said.
($1 = 71.2730 Indian rupees)
(Reporting by Karthika Suresh Namboothiri, Nallur Sethuraman in Bengaluru, and Rajendra Jadhav in Mumbai; editing by Arpan Varghese and Emelia Sithole-Matarise)