Gold demand in India turned weak last week as local prices jumped to their highest level in two and a half years. Traders in major buying centres in Asia have now pinned hopes on purchases ahead of the approaching Lunar New Year, Reuters reports.
Local gold prices in India, world’s second-largest gold consumer, touched their highest since July 2016 this week. “Prices are just moving higher and higher. Buyers are waiting for a correction in prices and the annual budget as there is speculation of a duty cut,” said a Mumbai-based dealer with a bullion importing bank.
Prime Minister Narendra Modi’s government will present the budget on 1 February. The bullion industry has been urging a tax reduction to combat smuggling, which has increased since India raised the import duty to 10 percent in August 2013, to narrow its current account deficit.
The industry speculates about the duty cut every year before the budget but the government hasn’t made any change in the tax structure in last six years.
Dealers in India were offering a discount of up to $7 an ounce over official domestic prices this week, up from last week’s discount of $6. The domestic price includes a 10 per cent import tax. Supplies are limited in the market due to lower imports in last few weeks.
India’s gold imports in December fell 24.3 per cent from a year ago to $2.57 billion, trade ministry data showed earlier this week.
Premiums in top consumer China stood mostly unchanged from last week at $6 to $9 an ounce. Some restocking by jewellers for Lunar New Year in China has already been done. The appreciation of the yuan has also kept the Chinese gold price stable without much volatility.”
Traders expected demand to pick up ahead of the Lunar New Year, which falls during the first week of February, since gold is considered a popular gift during this period.