Indian gold premium hits lowest this year – sources

Otmane El Rhazi from The Bullion Desk.

The discount on gold in Mumbai has widened to its lowest this year, sources told FastMarkets.

Gold for immediate delivery has been trading at discounts as low as $4 to the London spot price, one source told FastMarkets, reflecting the downturn in demand since Akshaya Tritiya in April.

Take-up is very low at present, particularly following gold’s four-percent price rally in the past few sessions and while dealers are sitting on large stocks.

India’s Ministry of Commerce and Industry valued April gold imports at $3.131 billion, up 78 percent year-on-year. At April’s average afternoon benchmark price of $1,197.91 per ounce, this equates to around 81 tonnes.

Reports from some major news outlets had initially pegged the figure at some 111 tonnes, citing an Indian finance official, though these have since proved erroneous.

Still, demand is likely to be suffering with the wedding season coming to a close in June – most related purchases should already have taken place, removing a key prop.

And while the rupee is weaker – it recently hit its worst against the dollar since September 2013 – consumers are more focussed on the possible announcement of the uniform tax scheme that is being planned by the Indian government, traders told FastMarkets.

The new bill aims to tackle the wide number of levies and taxes across the country, replacing it with a single goods and services tax (GST) that is anticipated to roll out in the next financial year.

But the bill has run into some difficulties – after Congress blocked its passage, it has had to be referred to the select committee of the Rajya Sabha, the upper house of the parliament of India.

Moreover, the country’s crucial monsoon season is fast approaching. India’s Indian Meteorological Department predicts rains to be 93 percent of a long-term average, which would be below the typical 96-104 percent.

Since India’s 120 million farmers account for around 60 percent of domestic consumption, any impact on agricultural output can have a sustained effect on demand.

(Editing by Mark Shaw)

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