MUMBAI/BENGALURU (Reuters) - Gold prices in India were at their widest discount to international prices in 11 months on Friday due to sluggish demand and an influx of the precious metal sourced from South Korea.
Indian traders are likely to import 25 tonnes of gold from South Korea in July-August, taking advantage of a recent tax change that allows imports without the usual 10 percent customs duty, industry officials told Reuters.
“South Korean supplies are distorting the market. Retail demand is still weak due to the price rise,” said N. Vijay, a bullion dealer from Salem in the southern Indian state of Tamil Nadu.
India had previously imposed a 12.5 percent excise duty on imports from countries with which it had signed Free Trade Agreements (FTAs), such as South Korea.
But this was scrapped along with other local taxes when India introduced a Goods and Services Tax (GST) from July 1.
Dealers in India were offering a discount of up to $13 an ounce this week over official domestic prices, compared with a discount of up to $7 an ounce last week. This week’s discount was the maximum since September 2016.
Local gold prices jumped to 29,390 rupees per 10 grams on Friday, the highest since June 8.
“Retail buyers and jewellers are waiting for prices to correct. They are not comfortable in buying above 29,000 rupees,” said a Mumbai-based dealer with a private bank.
Demand was also sluggish in other major centres in Asia due to high prices.
“At these levels, there has been more selling,” Brian Lan, managing director at gold dealer GoldSilver Central in Singapore, said.
Spot gold rose on Friday, supported by international political tensions and doubts over the ability of U.S. President Donald Trump’s administration to push through its economic agenda.
“A pullback in prices could spur some buying, especially from those looking to buy gold as a safe haven, since people are worried about North Korea and also Trump,” Lan said.
In top consumer China, premiums fell slightly to $3-$4 an ounce, compared with a $5-$6 range last week. In Hong Kong, premiums were quoted between 30 and 70 cents, versus the 40-70 cents range in the previous week.
In Japan, gold was flat versus the benchmark price, unchanged from last week, a Tokyo-based trader said.
Premiums in Singapore were also seen unchanged from the previous week’s range of 60 to 80 cents.
Reporting by Arpan Varghese and Apeksha Nair in Bengaluru. Editing by Jane Merriman