India Gold Discounts Hit Record High After Duty Hike
Gold discounts in India hit record highs after the government raised import duties to 15%, sharply weakening demand and increasing investor selling.
SociapaHQ
Gold discounts in India surged to record levels this week after the government sharply increased import duties on gold and silver, weakening domestic demand and triggering investor selling.
According to market dealers, discounts on gold reached as high as $207 per ounce over official domestic prices, inclusive of the 15% import duty and 3% sales levy. This compares with discounts of up to $15 an ounce and premiums of $6 recorded the previous week.
The sharp rise in prices following the duty hike reportedly pushed jewellers and retail buyers to the sidelines, while some investors began selling holdings, Reuters reported.
“The sudden price rise prompted investors to sell, while jewellers and retail buyers stayed on the sidelines,” a Hyderabad-based jeweller said.
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Duty Hike Weakens Gold Demand:
Earlier this week, India raised import tariffs on gold and silver to 15% from 6%. The government also tightened rules around duty-free gold imports for jewellery exports by limiting imports to 100 kilograms per licence.
Domestic gold prices were trading at around ₹1,60,500 per 10 grams on Friday after touching ₹1,64,497 earlier in the week, their highest level in more than two months.
A Mumbai-based bullion dealer said discounts widened significantly as demand weakened and scrap gold supplies increased.
While Indian demand softened, analysts said stronger buying activity in China helped keep global premiums supported.
“Firmer demand from China will likely counter India’s weaker demand after the latter’s policy changes,” ANZ said in a market note.
In China, gold traded at premiums of $15 to $20 an ounce over global benchmark prices, broadly unchanged from the previous week.
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China Demand Supports Gold Premiums:
According to Bernard Sin, regional director of Greater China at MKS PAMP, Chinese premiums remained supported by resilient investment demand and strong industrial buying activity.
He added that import restrictions continued to constrain supply, while industrial stockpiling from solar and electronics companies had intensified following the removal of VAT export rebates.
Globally, spot gold prices declined 2.8% during the week as higher energy prices fuelled inflation concerns and strengthened expectations that interest rates could remain elevated for longer.
Elsewhere in Asia, gold traded at par to premiums of $2 in Hong Kong, at discounts of $0.50 in Japan and premiums ranging from $1 to $3.30 in Singapore.
