Gold Price Gap Dips To 18.4%
The differential between the domestic and international prices of gold has declined considerably from 59.5 per cent in 1990-91 to 18.4 per cent in 1995-96, according to the RBI report. This has been a result of the liberalisation of the countrys gold market leading to greater integration with international markets.
The report has stated that the average gold price in the domestic market rose by 2.3 per cent to Rs 5,071 per 10 gm during 1996-97 as compared with an 6.2 per cent increase to Rs 4,958 per 10 gm, in the previous year. However on a point-to-point basis, the monthly average price of gold dropped 7.9 per cent to Rs 4,789 in March, 1997, (Rs 5,200 in March, 1996).
In the Mumbai market, gold prices fluctuated widely between Rs 5,360 as on May 3, 1996, and Rs 4,680 as on March 26, 1997, against the wider range of Rs 5,713-4,670 per 10 gm the previous year. The report says the London market recorded its lowest price since March 10, 1993. London gold price for 1996-97 declined by 3.3 per cent to $376 per troy ounce as against an increase of 1.6 per cent to $389 per troy ounce in 1995-96.
The bearish trend in this market could be attributed to the apprehension of gold sales by the IMF to mobilise resources for indebted countries coupled with reported sales by some European central banks to meet the Maastricht criterion of fiscal deficit.
Effective September 1996, the RBI started purchasing gold bonds under the Gold Bond Scheme, 1993-98, from the secondary market at an offer price based on international purchase of gold. Till June, 1997, 509 kg of gold was purchased from the market. In the domestic market, silver prices registered a marginal decline of 0.8 per cent from Rs 7,221 per kg in 1995-96 to Rs 7,165 per kg in 1996-97. Domestic prices followed the bearish trend that prevailed in the world market.
The spread between international and domestic prices of silver on an average basis for 1996-97 remained at the previous years level of 24.3 per cent after having declined for five years in succession.