Demand for gold in India rose this week as many jewellers resumed purchases after having stayed away for a few weeks hoping for an import duty cut in the government budget. On Wednesday, the Indian government presented its budget for the 2017/18 financial year, but did not change the import duty on gold.
The bullion industry had been urging a reduction in the duty to combat smuggling, which has increased since India raised import duty to 10 percent in August 2013 in an effort to narrow a gaping current account deficit. "Since there is clarity on duty structure now, jewellers have started buying. Even at higher levels, they are making purchases," said Ashok Jain, proprietor of Mumbai-based wholesaler Chenaji Narsinghji.
In the local market, gold prices were trading around 28,900 rupees per 10 grams on Friday. In December, prices had hit 26,862 rupees per 10 grams, their lowest since February 2, 2016. "Supply in the local market is limited as banks curtailed import last week. That's why now they could charge a premium despite the price rise," said a Mumbai-based dealer with a private bank.
Dealers in India, the world's second-largest consumer of the metal, were charging a premium of up to $2 an ounce this week over official domestic prices, unchanged from last week. The domestic price includes a 10 percent import tax.Gold demand in India will be muted this year after dropping to multi-year lows in 2016, with trading dented as the government pushes to make markets for the metal more transparent and brings in a new tax, the World Gold Council (WGC) said on Friday.
Elsewhere in Asia, demand remained subdued with Chinese markets shut for the week-long Lunar New Year holidays. "The physical demand remained very quiet owing to Chinese holidays and movements across Asia also remained very weak," a Singapore-based banker said. Premiums in China, the top-consumer nation, were about $6 in the previous week. Meanwhile, premiums in Singapore and Hong Kong remained unchanged at $1-$1.40 an ounce.
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