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India gold at $3-$5/oz discount as demand dries up on high prices

Thursday, Feb 21

 

By Roshni Devi

 

MUMBAI – Prices of gold in India have slipped to the duty-paid landed price as demand has dried up with prices hitting five-year highs, traders said.

 

The prices in India had converged with those on COMEX earlier this month.

 

Gold contracts rose to a 10-month high of $1,349.40 an ounce on COMEX on Wednesday. At spot markets in Mumbai, prices of gold had hit a fresh five-year high of 33,850 rupees per 10 gm on Wednesday.

 

With global prices at $1,349 per troy ounce (1 troy ounce = 31.1 gm), importing gold into India would cost 105,551 rupees per ounce, or 33,939 rupees per 10 gm at the rupee's last closing price of 71.11 per dollar, and considering a 10% customs duty.

 

However, prices in spot markets are hovering around 33,850 rupees per 10 gm, indicating that domestic prices have slipped into a discount.

 

Earlier this month, domestic gold prices were in line with the import parity price after trading at a discount of $8 an ounce in January because of a surplus supply. While prices recovered to align with international prices in early February, they have once again slipped into a discount.

 

"The discount rose to $5 yesterday (Wednesday) and is around $3 today as there is no demand. Prices are so high that people aren't buying. Customers would rather wait for prices to fall than buy when prices are around 35,000 rupees per 10 gm (including the goods and services tax) now," said Paresh Chouhan, director of SPN Gold, a Mumbai-based bullion dealer.

 

Developments surrounding Brexit and lack of clarity over a US-China trade deal have recently pushed gold prices higher.

 

"There are hardly any customers for fresh buying. A few customers come to exchange old ornaments for new ones. Most customers are postponing their purchases on expectations of a price fall," said Kumar Jain, of Umedmal Tilokchand Zaveri.  End

 

US$1 = 71.25 rupees

 

Edited by Subham Mitra

 

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