Gold prices in the spot market here fell on Thursday after the Reserve Bank of India (RBI) last night relaxed rules for importing the metal.
Spot gold premium crashed from $80 an ounce on Wednesday to about $20 on Thursday, after falling to $10 during the day. In evening trade, however, the premium rose to $35-40, as banks didn’t indicate big gold purchases through the next few days. Actual gold imports could take some time.
The price of gold here fell by Rs 525, about two per cent, to Rs 28,200/10g, a 10-month low, from Rs 28,725 on Wednesday. At $1,295-1,300 an ounce, the international price was steady. MCX June gold futures lost Rs 1,000 from Wednesday’s high and were trading around Rs 27,260 on Thursday.
“Before the relaxation, the August contract was at a discount of Rs 800 to the June contract. This has now shrunk to Rs 125. Delivery concerns are easing and their hangover is not visible in futures prices anymore,” said Ajay Kedia, director of Kedia Commodities.
The next big development for the Indian gold market could be an import duty cut in the 2014-15 Budget, expected to be presented in the first fortnight of July. The market expects a two-percentage-point duty cut.
On Wednesday, RBI allowed premier trading and export houses to import gold. Analysts believe their purchases will be 120-140 tonnes higher in 2014-15. “We expect gold imports will surge this year due to the relaxations and cheaper prices. We see gold imports at about 900 tonnes in 2014-15 and an import bill of about $38 billion,” said Sonal Varma, India economist, Nomura Financial.
Kedia said he expected the gold import duty could be lowered by two-three percentage points in the Budget; a similar drop later in the year could cut the 10.3 per cent duty by an overall five-six percentage points.
“RBI’s decisions will increase gold supply and ease some of the cost pressures jewellers are facing,” said Somasundaram P R, managing director, World Gold Council in India.