Gold premiums hit record in India

MUMBAI Tue Oct 15, 2013 7:51pm IST

Gold bars are displayed at a gold jewellery shop in Chandigarh April 11, 2012. REUTERS/Ajay Verma/Files

Gold bars are displayed at a gold jewellery shop in Chandigarh April 11, 2012.

Credit: Reuters/Ajay Verma/Files

Related Topics

MUMBAI (Reuters) - Gold premiums in India, the world's biggest buyer of the precious metal, hit a record $100 an ounce, about 8 percent over London prices, on a shortage of supplies to meet festival demand, traders said on Tuesday.

Banks, the primary dealers of bullion, are currently importing the yellow metal chiefly for exporters, as under the so-called 80/20 principle, jewellery exporters get priority for supplies over domestic manufacturers.

The principle, part of a package of measures announced in July aimed at cutting India's current account deficit by reducing gold imports, states that 20 percent of all gold imported into India must be re-exported.

"There are no supplies in the domestic market, and there is a little demand due to festivals... what little supplies that come, go to exporters," Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation (GJF) told Reuters.

Most suppliers in Mumbai and Kolkata have started quoting premiums in excess of $100 an ounce above London prices, more than double the $40 charged last week, Bamalwa said.

Due to the additional premiums, quoted gold prices in India are 8 percent higher than the current spot price of $1,261 an ounce.

Gold imports have virtually dried up in India after the federal government introduced the 80/20 rule, creating confusion among government officials on its implementation and halting shipments for about two months.

Following government clarifications, banks have begun to process fresh orders, but the rule will still inhibit imports.

One official at a private bullion importing bank in Mumbai, who did not wish to be named, said any stocks that they received were going to exporters. "Only after that, domestic (supplies) could start," he said.

The festival season has started in India and will peak with Dhanteras, an auspicious day for buying gold, in November, while the wedding season will continue till December.

"Our work has virtually stopped now... there is a premium of 7 percent on global prices. We are helpless to buy at such high prices," said Harshad Ajmera, proprietor of JJ Gold House, a wholesaler in Kolkata.

The World Gold Council has said India's gold demand could rise as much as 15 percent this quarter to 300 tonnes as pent-up demand following a good monsoon keeps the country on track for yearly demand estimated at 1,000 tonnes.

"For upcoming Dhanteras, if the industry is not getting raw material, we will face a major problem," said Haresh Soni, chairman of GJF. (Editing by Jan Harvey and James Jukwey)

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

  • Most Popular
  • Most Shared

Monetary Policy

REUTERS SHOWCASE

Monetary Policy

Monetary Policy

Fed renews zero rate pledge, but hints at steeper rate hike path.  Full Article 

Eyeing Stocks

Eyeing Stocks

Interview - EPFO chief urges green light to buy stocks  Full Article 

Stimulus Reports

Stimulus Reports

China cenbank injects $81 bln into major banks to support economy - reports  Full Article 

Ranbaxy Investigation

Ranbaxy Investigation

Ranbaxy says U.S. authorities seek information on pricing data.  Full Article 

E-Commerce

E-Commerce

Tiger Global leads $60 million investment in Quikr.  Full Article 

Monsoon Update

Monsoon Update

Delayed retreat of monsoon rains to start this weekend  Full Article 

Financing Deal

Financing Deal

IndiGo agrees $2.6 billion aircraft finance deal with China's ICBC  Full Article 

Grim Outlook

Grim Outlook

Sony deepens loss estimate on struggling smartphone business  Full Article 

Reuters India Mobile

Reuters India Mobile

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