June 12, 2020 / 12:43 PM / 23 days ago

India gold demand still muted, Bangladesh to scrap import taxes

BENGALURU/MUMBAI (Reuters) - Physical gold demand in India was lacklustre this week even as shops reopened, while Bangladesh announced plans to withdraw import taxes to clamp down on bullion smuggling.

A salesman arranges gold bangles inside a jewellery showroom on the occasion of Akshaya Tritiya, a major gold buying festival, in Mumbai, India, May 7, 2019. REUTERS/Francis Mascarenhas/Files

“Showrooms have opened, but still jewellers are waiting for customers. As public transport is not available in cities like Mumbai, consumers are not stepping out,” said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.

Indian dealers offered discounts of up to $20 an ounce over official domestic prices, down from last week’s $32, which was the highest since early April. The domestic price includes a 12.5% import tax and 3% sales tax.

Some potential buyers have been delaying purchases due to volatile prices, said a Mumbai-based dealer with a bullion importing bank. Indian gold prices have risen nearly 18% so far in 2020.

Neighboring Bangladesh, meanwhile, is set to scrap taxes on gold imports to curb smuggling, with the revised guidelines likely to be implemented from July 1.

“Despite the Gold Policy 2018, gold has not been imported legally into the country due to the existing high tax incidence,” Finance Minister A.H.M. Mustafa Kamal said on Thursday while unveiling the country’s 2020/21 budget.

“I propose to withdraw 15% VAT on the import of gold bar to discourage illegal import and encourage the import on legal routes through authorised dealers.”

In top consumer China, discounts eased to $5-$10 an ounce versus benchmark prices from last week’s $11-$14 discounts.

Investment demand dominates the market rather than retail, said Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong.

Premiums in Hong Kong were steady at $0.50-$1 an ounce.

In Singapore, premiums inched up to $1.25-$1.50 an ounce from $1-$1.50 last week.

Demand is higher than before the onset of the COVID-19 crisis, said Vincent Tie, sales manager at Silver Bullion.

Benchmark spot prices have risen 2.8% so far this week, amid the bleak economic outlook. [GOL/]

In Japan, gold was sold anywhere between at par with the benchmark to a $0.50 premium.

Reporting by Ruma Paul in Dhaka, Eileen Soreng, K. Sathya Narayanan and Brijesh Patel in Bengaluru and Rajendra Jadhav in Mumbai; editing by Emelia Sithole-Matarise

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