MUMBAI/SINGAPORE, Oct 25 (Reuters) - Indian gold premiums hit another record high on Friday because of a supply crunch ahead of the Diwali festival next week, caused in large part by government measures to restrict imports of the precious metal.
Local prices were $130 an ounce higher than London prices , compared with $120 earlier this week and $100 last week, traders said.
India, struggling with a high trade deficit and a weak currency, has made it difficult and expensive for Indians to get hold of gold by setting a record 10 percent import duty and stipulating that 20 percent of imports should be used for exports.
Imports for domestic use have virtually come to a halt for about three months.
“There is no availability of gold. We don’t feel like it’s Diwali this year as business has come to a standstill,” said Haresh Acharya, head of the bullion desk at Parker Bullion, a wholesaler in Ahmedabad.
Gold is an integral part of Indian culture, given as a dowry for marriages and bought around religious festivals.
Next week India also celebrates Dhanteras, when consumers buy the yellow metal for auspicious reasons, prompting the sharp jump in premiums.
“Even jewellers are not willing to pay this hefty premium,” said Bachhraj Bamalwa, director with the All India Gems and Jewellery Trade Federation. “Demand has picked up a little bit, but it is way below our expectations.”
An official at a state-run trading house said the firm had been importing for domestic use but in very small quantities.
“We imported about 100 kgs for domestic use since August, and the government officials at ground level are taking time to understand the nuances of the new rules,” said the official on condition of anonymity.
“It will take another 15-30 days for them to smoothen out imports for domestic use,” the official said.
India’s imports fell to a mere 7 tonnes in September from a record 162 tonnes in May.
Demand across the rest of Asia remained soft, with Hong Kong premiums unchanged for over a month at $1.50 an ounce. Singapore premiums dropped to $1 this week from $1.50 last week.
Premiums on the Shanghai Gold Exchange fell to a multi-month low of $2 an ounce on Friday. That compares to highs of $30 seen in April-May. (Editing by Alan Raybould)