MUMBAI: Gold premiums in India, the world’s second-biggest consumer of the metal after China, fell 17 percent to their lowest in four months as buyers postponed purchases on speculation over a possible cut in import duty next week.
Premiums were quoted at $62 an ounce, a level last seen in the second week of October last year, compared to $75 on Thursday. Premiums hit a record $160 last month.
The leader of India’s ruling Congress party, Sonia Gandhi, has asked the government to review tough import restrictions on gold, which include a record 10 percent import duty, local media reported on January 23.
India used to be the world’s biggest buyer of bullion until the government and central bank stepped in last year with import curbs aimed at reducing a record current-account deficit.
“There is a rumour of an import duty cut. The market is expecting a cut of a minimum two or maximum fivepercent on Monday,” said Harshad Ajmera, Director of the All India Gems and Jewellery Trade Federation, which groups over 300,000 jewellers.
“No one wants to buy at a higher duty so people have reduced orders, preferring to wait until Monday,” Ajmera said.
Finance ministry officials were not immediately available to comment. The government will present an interim budget on Monday, in which it is expected to announce a relaxation in gold import curbs.
“Falling premiums can discourage jewellery imports, thus cutting off a source of supply that was strong during December and January,” said Sudheesh Nambiath, India analyst with Thomson Reuters GFMS.
However, market participants said the so-called 80/20 rule, which links exports to imports and has squeezed supplies in the local market, may be reviewed only after March, when the government has a clearer idea of the trade deficit.
India’s trade deficit came in at $9.9bn in January, in line with the six-month average of $10bn. This compares with a roughly $19bn average earlier this fiscal year.
Reuters
