MUMBAI Gold premiums doubled in India on Wednesday as suppliers struggled to meet surging demand after a ban on consignment imports, but futures prices fell to their lowest in more than a month as international gold prices fell due to a strong dollar.
India, the world's biggest buyer of gold, now requires importers to pay upfront for inventory, making it difficult for smaller jewellers with lower working capital to source supplies. The government also raised the import duty to 8 percent in May to keep a lid on the surging current account deficit.
"There may be some demand from jewellers for raw material," said Bachhraj Bamalwa, former chairman of All India Gems and Jewellery Trade Federation, adding that premiums charged on London prices shot to $20 an ounce on Wednesday from $8-$10 on Tuesday.
Most of the supplies are being met by privately held trading houses and state-run agencies such as Metals and Minerals Trading Corp of India Ltd (MMTC.NS), State Trading Corp (STCI.NS), and PEC Ltd through their imports in April and early May as banks await guidelines from the central bank on outright cash purchases.
"We are unable to supply, though there is demand ... we give deliveries after 2-3 days," said Harshad Ajmera, proprietor of wholesaler JJ Gold House in Kolkata.
Indian gold imports fell to $36 million in the second half of May from an average of $135 million per day in the first half, Finance Minister P. Chidambaram said earlier in June.
India has ruled out a blanket ban on gold imports or any increase in customs duty from the current 8 percent.
On Wednesday, the actively traded gold contract for August delivery on the Multi Commodity Exchange (MCX) was down 2.67 percent at 25,851 rupees per 10 grams. It earlier fell to 25,758 rupees, a level last seen on May 20.
Global gold prices fell to their lowest in nearly three years, pressured by strong U.S. economic data that boosted stock markets and supported the Federal Reserve's plan to scale back monetary easing in the next few months.
A weaker rupee limited the downside. The rupee plays an important role in determining the landed cost of dollar-quoted gold.
Silver for July delivery on the MCX was down 3.92 percent at 39,070 rupees per kg.
(Editing by Jijo Jacob and Prateek Chatterjee)