Asia gold: India discounts soar to record high on import duty hike

MUMBAI/BENGALURU: Gold discounts in India jumped to a record this week as a sharp import duty hike slowed demand and triggered investor selling, while investment demand kept Chinese premiums firm.

Dealers in India quoted discounts of up to USD207 an ounce over official domestic prices this week, inclusive of 15percent import and 3percent sales levies, up from the previous week’s discounts of up to USD15 an ounce and premiums of USD6.

The sudden price rise prompted investors to sell, while jewellers and retail buyers stayed on the sidelines, said a jeweller based in Hyderabad.

Earlier this week, India raised import tariffs on gold and silver to 15percent from 6percent. The world’s second-largest consumer of gold also tightened rules for duty-free gold imports for jewellery exports by capping imports at 100 kilograms per licence.

Domestic gold prices in India were trading around 160,500 rupees per 10 grams on Friday, after rising to 164,497 rupees earlier this week, the highest in more than two months.

Gold discounts jumped to unusually high levels as demand virtually disappeared and scrap supplies increased, said a Mumbai-based bullion dealer. “Firmer demand from China will likely counter India’s weaker demand after the latter’s policy changes,” ANZ said in a note.

In top consumer China, bullion traded at premiums of USD15 to USD20 an ounce over the global benchmark price, largely in line with last week’s premiums of USD14 to USD20.

Premiums remained steady this week, supported by resilient investment demand and aggressive industrial buying, said Bernard Sin, regional director of Greater China at MKS PAMP. “Import restrictions remain a key constraint, though loosening is widely anticipated soon.

Industrial stockpiling by solar and electronics firms is particularly aggressive, amplified by the removal of VAT (value-added tax) export rebates,” he said.

Spot gold prices have declined 2.8percent so far in the week, as higher energy prices fuelled inflation concerns and reinforced expectations of prolonged higher interest rates.

In Hong Kong, gold traded at par to premiums of USD2, while in Japan, gold was sold at a discount of USD0.50. In Singapore, gold was sold at premiums of USD1 to USD3.30.