The physical premium on gold for immediate delivery in Mumbai remains stagnant, sources said, despite the release of pent-up demand following the release of the annual budget at the weekend.
The premium on one-kilogram gold bars has held at $3 per ounce over the London spot price after the Indian government decided against reducing the import duty on gold from the current level of 10 percent.
“It really is very surprising – I think it’s accurate to say that the news really stumped the market,” Metals Focus’ Chirag Sheth said.
New Delhi instead opted for further monetisation of the gold market through the introduction of a gold-centric bond and a new gold deposit scheme.
The bonds will carry a fixed interest rate and will be redeemable in cash pegged to the face value of gold at the time of maturity. As well as giving investors long exposure to gold, they will also earn a fixed interest rate – gold typically has no direct yield.
Importers and stockists had been holding off buying in anticipation of a cut to duties – as few as 20 tonnes of gold may have been imported last month although official figures are not due mid-March.
“Indian demand for gold is likely to pick up sharply ahead of the wedding season – jewellers are likely to replenish their inventories. This should support gold prices as well as premiums,” FastMarkets analyst Boris Mikanikrezai said. “That said, we do not expect that the pick-up in India gold demand will be a major driver.”
Demand has been unexceptional in the past few days amid ample supply, sources said, although Sheth suggested that it will take a few days for the effects of the Indian government’s decision to keep the import duty unchanged to filter through the market.
Cheaply refined metal was stockpiled prior to the budget, some sources claimed – refiners continue to bring in large amounts of gold doré to capitalise on a differential in import duties and while available scrap levels have fallen in response to low prices.
The lack of changes announced in the budget will now only fuel interest from several refiners to explore the possibility to opening new facilities dedicated to the refining of doré.
In Shanghai, the premium has remained higher because of lower international prices, suggesting that China’s sensitivity to cheaper prices remains and that the post New-Year stocking period has yet to fade.
Spot gold peaked at $1,388.00 last year on March 17 – its highest since September 2013 – but it was last trading around $1,200 per ounce.
Gold for immediate delivery in Shanghai was quoted at $4 over the spot price by MKS, nearly a week after Chinese markets reopened after its annual Spring festival. But demand that built up during the week-long holiday is winding down.
In Hong Kong, a build-up of material continues to weigh on premiums, which market sources quoted at $1 over spot. In Singapore, gold for immediate delivery remained around $1, while in Bangkok premiums have moved up from parity to around $1.50 over the London spot.
In Dubai, premiums have moved off parity and up to 35 cents on the .995 bar and 50 cents on 9999 bars due to lower prices.
In Turkey, the market remains at parity, according to Troy Precious Metals GoldTakas system, although demand is gradually increasing for the favoured 995 LBMA 1kg gold bar.
(Editing by Mark Shaw)
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