Gold import up, discount down

Discounts fall to 3-month low levels due to pick-up in imports, demand

In the past 10 days, gold import has seen some flow, with demand from jewellers and falling prices.

There are the Ganpati festivals in the west and south, followed by Onam in the second week of September and then the Dussehra demand. Prices were quoting at a three to five per cent discount (to the landed cost of import) in the domestic market in recent months but with demand up, this has fallen to a three-month low to $17.5 an ounce or around Rs 400 per 10g.

Shekhar Bhandari, executive vice-president at Kotak Mahindra Bank, said: “A US Federal Reserve rate hike possibility is becoming stronger, due to which gold prices have moderated and overall sentiment in India has improved, ahead of the festivals and harvesting season. That has resulted in jewellers’ demand and imports going up.”

Market estimates suggest against 20 tonnes of import in July, the August import is expected to be higher and September might see a doubling over July, to 35-40 tonnes if prices remain moderate. Consumers do not expect the levels they’d seen in December– January, when gold was Rs 25-27,000 per 10g.

In recent months, smuggled gold supplies had increased, while consumers also sold old jewellery or exchanged these for new. Old stock not accounted for was coming into the market to take advantage of the amnesty in tax. All such supplies are also lower now, said an analyst.

Gold prices on Friday closed at Rs 30,845 for 10g of standard gold. The government has issued a new tranche of sovereign gold bonds at Rs 31500 (999-purity/per 10g), while Friday’s closing price in Mumbai was Rs 30,995. Traders believe if gold prices fall further by two per cent, the bond response might not be as good as in the past. The issue closes this Friday.

Since February, gold has been in quoted at a discount in the spot market, due to low demand and high prices. Bullion refineries are understood to have asked the government to allow them to import dore (unrefined gold) for exporting in refined bar forms without any other value addition, as refining and selling in the domestic market was becoming unviable.