Gold buying evaporates in India due to import duty hike

SINGAPORE/MUMBAI Wed Jan 23, 2013 3:30pm IST

Gold biscuits are displayed inside a jewelery showroom in Hyderabad April 11, 2012. REUTERS/Krishnendu Halder/Files

Gold biscuits are displayed inside a jewelery showroom in Hyderabad April 11, 2012.

Credit: Reuters/Krishnendu Halder/Files

Related Topics

SINGAPORE/MUMBAI (Reuters) - India's gold imports slowed to a trickle this week after the government raised import tariffs at the same time that global prices strengthened, and these higher prices also deterred purchases from elsewhere in Asia, traders said on Wednesday.

Asian buyers rushed to the market in early January to take advantage of gold prices which were below $1,630 an ounce, their lowest in more than four months.

Prices, however, have since risen to almost $1,700 an ounce, discouraging buyers who usually stock up on gold ahead of the Lunar New Year holidays in mid-February.

Most Indian buyers stocked up on gold in the first week of January, after the finance minister hinted that a duty hike is on the cards.

Last week, India raised import taxes on gold to 6 percent from 4 percent in a bid to curb imports to help rein in a record current account deficit, but industry experts said long-term gold demand is unlikely to waiver.

"We had comfortable sales in the last two months, but after the duty hike no one is interested," said Harshad Ajmera, proprietor of JJ Gold House, a wholesaler in Kolkata.

"Over the longer term, unofficial channels will replace official import channels as gold is required from birth till death in Indian tradition," he added. India is the world's biggest gold importer.

The benchmark gold futures contract on the Multi Commodity Exchange (MCX) traded at 30,792 rupees per 10 grams, up from a one-month low of 30,758 rupees hit last week.


Higher prices also slowed down China's gold buying two-and-a-half weeks before the Lunar New Year holiday during which gifts of gold jewellery, bars and coins are popular. Some traders said buyers had already stocked up enough in January.

"I wouldn't say demand from China is really good in comparison to the same time in the last few years," said a Hong Kong-based trader.

Spot gold stood at $1,691.29 an ounce by 0907 GMT, close to a one-month high of $1,695.76 hit in the previous session. The higher prices have teased out some scrap selling, dealers said.

A firmer rupiah has triggered some buying from Indonesia, a Singapore-based dealer said, while there was some buying and selling from Thailand.

"If the rupiah keeps strengthening, we should be able to see physical demand continue from Indonesia," she said.

Gold premiums in Singapore stood at $1.10 to $1.20 an ounce, little changed from last week, dealers said.

In Tokyo, selling in the physical market slowed after the yen strengthened against the dollar and lowered gold prices in the Japanese currency.


Investors will closely watch the Federal Reserve's policy meeting next week to gauge the central bank's attitude towards its bond purchase programme.

Any hint that the Fed was considering withdrawing such measures would deal a heavy blow to gold, which has attracted investors who were worried about currency debasement as a result of aggressive monetary easing.

(Editing by Miral Fahmy)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared
The Wipro campus is seen in Bangalore June 23, 2009. REUTERS/Punit Paranjpe/Files

Wipro Q4 net profit beats estimates, rises 29 percent

Wipro posted a 29 percent rise in its fourth-quarter net profit, beating expectations, helped by increased IT spending by its customers. For the quarter ended March 31, the company said it earned 22.27 billion rupees compared with 17.29 billion rupees a year earlier..  Full Article | Full Coverage 


Election 2014

Election 2014

India holds biggest day of voting with BJP gaining strength  Read | Full Coverage 

Market Eye

Market Eye

Sensex jumps 351 points, snaps 3-day losing streak  Full Article 

S&P on India

S&P on India

S&P: India's ratings to depend on next govt econ, fiscal policies.  Full Article 

Ambitious Aim

Ambitious Aim

In green car race, Toyota adds muscle with fuel-cell launch.  Full Article 

Deal Talk

Deal Talk

Piramal to buy 20 percent stake in Shriram Capital for $334 million.  Full Article 

Bond Market

Bond Market

A star abroad, RBI boss riles bond traders at home  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage