Gold premiums in India jump as government keeps import duty at 10%

MUMBAI (Scrap Monster): The gold premiums in India are expected to jump sharply after the Finance Minister decided to leave the gold import duties high at 10%. The premiums are expected to rise to $5 per ounce over spot price.

According to jewelers, gold prices in the country had been on a declining trend recently. Consumers were seen deferring their gold purchases in anticipation of a gold import duty cut. However, with the government opting to leave the duties unchanged, the hopes of a duty cut have faded. Gold buying activity is expected to pick up ahead of wedding season that extends until May. The increased gold buying activity is likely to lead to jump in gold prices and rise in gold premiums. Gold premiums in Mumbai are expected to touch $3-$4 over the next week.

The replenishment of gold inventory by jewelers and manufactures could boost the premiums to even higher levels. According to industry sources, jewelers had been running on low inventory levels on hopes of favorable budget announcements. With no duty cuts announced, the jewelers are likely to place fresh orders next week.

According to GFMS Thomson Reuters, the Indian gold imports are likely to jump higher to almost 90 tonnes during March when compared with the estimated 50 tonnes during this month. The official gold imports have started to pick up ever since the government announced certain relaxations on gold import restrictions. However, gold imports into the country had dropped sharply during the past week on account of importers exercising deliberate delay in imports in anticipation of duty cuts to be announced by the government.

The recently presented budget kept the duty on gold imports unchanged. Instead, the Minister announced several gold monetization schemes including gold deposit scheme, gold sovereign bonds and Indian gold coin.