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Gold records biggest discount in 7 months, higher prices hurt retail demand

Prices have risen due to GST, under which tax rate jumped to 3% from 1.2% previously

Reuters  |  Mumbai/Bengaluru 

Representative image of gold.
Representative image of gold.

prices in this week recorded the biggest in seven months as a rebound in prices curtailed retail demand, while lower premiums in other Asian centres failed to lure customers amid the seasonal slowdown.

"In the local market, prices have risen due to the (Goods and Services Tax) and a rally in overseas prices. Consumers are not comfortable with the price rise," said Mukesh Kothari, director at bullion dealer RiddiSiddhi Bullions in

As part of a new nationwide tax regime that kicked in on July 1, the on has jumped to 3 per cent from 1.2 per cent previously.

"Usually remains weak in July. This year, the price rise has added further pressure," Kothari said.

Dealers in were offering a of up to $4 an ounce this week over official domestic prices, compared to a of $1 last week. The domestic price includes a 10 per cent import tax.

"Jewellers are not making due to weak retail They have sufficient inventory for next few weeks," said a Mumbai-based dealer with a private bank.

India's imports could fall below 35 tonnes in July, consultancy GFMS said.

In top consumer China, premiums ranged from $5 to $10 an ounce. Premiums were slightly below $10 last week.

The international spot benchmark was trading near six-week highs hit on Thursday as the dollar plummeted after the US Federal Reserve indicated it would keep to a slow path of monetary tightening.

In Hong Kong, premiums were between 50 to 70 cents, compared with the 60 cents to $1 range in the previous week.

"is not expected to come back in substantial levels until a couple of weeks into August," said Dick Poon, general manager at Heraeus Precious Metals in Hong Kong.

Physical dipped in Singapore as well with premiums ranging between 70 cents and a dollar as against the 75 cents to $1.10 level last week,

"in Singapore has been subdued, but scrap flows and disinvestment of bars from across the region have boosted inflows," said Cameron Alexander, an analyst with Thomson Reuters-owned metals consultancy GFMS.

Meanwhile, in Japan, premiums were unchanged at 25 cents per ounce over the benchmark prices.

"With the summer holidays coming up, the slowdown in physical in Japan is more due to seasonal factors than because of rallying prices," said a Tokyo-based trader.

Physical globally rose to 1,895 tonnes in the first half of 2017, up 17 per cent from the same period last year, GFMS analysts at Thomson Reuters said.

First Published: Fri, July 28 2017. 17:36 IST
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