Indian jewellers are paying gold importers more than double last month's premiums as they scramble to meet a resurgence in demand stoked by a steep fall in global prices and the approach of the Diwali festive season. The rise in premiums suggests a jump in imports by the world's top buyer.
Where stocks had fallen earlier this year after dealers, bankers and jewellers slashed purchases on signs that record-high prices had crimped demand. Premiums paid to importers have more than doubled to about $1.80 per kilogram from 80-85 cents last month, dealers said. India imported about 30 tonnes in July, a drop of nearly 56 percent from a year earlier, and imported 24 tonnes in June, data from the Bombay Bullion Association showed. The World Gold Council said India's total gold demand fell 47 percent on the year in January-June to 263.5 tonnes.
"Gold imports this month will be close to 50 tonnes," said Harish Galipelli, head of research at brokerage Karvy Comtrade. But Daman Prakash, a Chennai-based bullion dealer and member of the Tamil Nadu Bullion Forum, was more bullish. He reckons imports could surpass last August's 79 tonnes, the highest for 2007.
International gold prices tumbled by more than a fifth last week to below $800 an ounce, after hitting a four-month high of $987.75 in mid-July and a record $1,030 in March. Local demand for the precious metal picked up after domestic prices fell below 13,000 rupees ($300) per 10 grams from a record above 13,800 rupees in mid-July. Spot gold was trading at 11,228 rupees per 10 grams on Tuesday, according to Punjab National Bank.
Analysts said wholesale dealers were unlikely to drop their prices significantly as the festival season got under way, but the high premiums were not deterring buyers. Ranjeet Kumar Chaubey, deputy manager and dealer at state-run Punjab National Bank, said the bank had three to four clients with no stock waiting for gold at different locations. "My clients are ready to pay any premium," Chaubey said.
The premium in the southern city of Chennai has almost quadrupled to 40 rupees per gram from 10 to 12 rupees normally. "Some jewellers are even willing to pay a premium of up to $2 a kilogram," said a bullion dealer at a leading Indian bank who did not want to be identified. "But we don't have the stocks."
The delivery time for gold jewellery has gone up to a week in many regional markets from just one day last month, and analysts and dealers expect supply to remain tight this week at least and beyond if world prices fall further. Prakash in Chennai said due to falling demand earlier in the year, refiners had geared down production and were not able to ramp it up rapidly.
"Banks are not in a position to source materials from refiners immediately, which entails a delay of five to six days," he said. Krishna Kumar Nathani, managing director of consultancy Indiabullion.com, agreed: "There is no ready delivery of gold available, for love or money."