Gold discounts in India hit 17-month high on hopes of duty cut

NEW DELHI (Scrap Monster): The gold importers in India are offering discounts of up to $16 per Oz over London prices. The discounts crept higher due to lower intake by jewelers who anticipate a possible cut in high gold import duty during the budget. The gold discounts have widened to hit 17-month highs.

Normally, gold importers charge hefty premium over London prices. The premiums which went through the roof ahead of festive and wedding season had dropped to $1-$2 per Oz over London prices last week. According to industry sources, the importers are willing to offload their gold stocks at a discount, mainly because of the huge cost involved in holding the yellow metal. The discounts range from $4 to $16, with highest being offered in South India.

The gold demand in the country has seen remarkable decline in the past one month. The imports had plunged to 29 tonnes in Dec ’14. Sources indicate that the country has imported less than 16 tonnes so far in January this year. The jewelers are seen unwilling to add on to their inventory, as the recent hike in gold price has forced customers to defer their gold purchases.

Moreover, the trade anticipates that the Finance Minister may announce gold import duty cut during the budget, scheduled to be presented on Feb 28^th. The gold trade body had urged the government to lower import duty on gold, as it was the most appropriate time to do so. The sharp fall in gold imports and the drastic drop in oil prices have brought the country’s trade deficit under control. Incidentally, trade deficit had touched 10-month low in Dec ’14.

Elsewhere, spot premiums at Chinese Shanghai Gold Exchange remained rangebound between $3 and $6 per ounce over spot prices on 1 kilogram bars. The premiums in Hong Kong and Singapore were slightly higher at $1.50 per ounce each. Meanwhile, the gold premiums in Dubai declined to $0.50 during the week.