London 05/04/2012 - Gold trading in India briefly re-emerged yesterday, with interest revived by the drop in prices.
Market activity had been extremely sluggish over the past few weeks while the country's jewellers carried out an extended strike in protest against higher import duties proposed by the government last month.
"Physical demand from India reacted strongly to the sharp drop in gold prices Wednesday, most notably below $1,620," broker UBS said. "Our physical sales to the region were the strongest since March 14."
Gold fell to a three-month low of $1,612.50 per ounce on international markets on Wednesday, while Indian gold touched its lowest since March 21 at 27,731 rupees per ounce on the same day.
But despite yesterday's spurt, discontent among local goldsmiths discontent remains ahead of tomorrow's meeting between jeweller associations and finance minister Pranab Mukherjee to discuss new rules on the excise duty of 0.3 percent on unbranded gold ornaments.
Jewellers started their first strike in seven years on March 17 after New Delhi proposed changes to the gold import duty tariff, doubling these to four percent. This came after an increase to 2.06 percent in January from a previous fixed rate of 30,900 rupees per net kilogram.
Jewellers in the main cities remain closed, with only those in the southern part of the country open for business, according to local dealers, and a final decision on when to reopen fully will not be taken before the start of May. Goldsmiths will remain on strike until the duty is reviewed.
"Their grievance derives from the additional bureaucracy, paperwork, administration, etc. that will follow," UBS said. "Also, a one percent excise will naturally result in a greater recording of transactions (good for transparency and the government's revenue)."
"And, finally, one of the prime reasons why the strike has lasted so long is that this excise duty will be implemented retroactively, meaning an Indian jeweller sitting on old gold stocks will have to pay duty on those as well," it added.
Earlier this week, the president of the Bombay Bullion Association (BBA) said that he expects gold imports to remain weak over the coming months after March saw just 15/20 tonnes coming in. Imports could total no more than 800 tonnes this year, down from 878 tonnes last year.
"No imports were recorded after March 16, when the duty tariff was proposed," a dealer said.
Gold bars were sold at a discount of between 0.6 and one percent in the southern part of the country at the start of the week, he added.
The base price - the rate at which imports are taxed irrespective of the purchase price - stands at 1,151.8 rupees per 10 grams this month. This refers to gold imported by locals who have travelled abroad as part of their personal baggage for a value of more than 25,000 rupees.
Although the strike in India has affected Dubai exports - India is Dubai's main market for 995 fineness gold - demand in the "city of gold" seem to be holding well this week again.
"We are seeing general good buying and, if January and February were slow, March was very good and April seems to have started well but it's too early days," Gerry Schubert, head of precious metals at Emirates NBD, said. "We think demand will stay robust with the Akshaya festival on April 24."
One-kilo gold bars were trading at $0.25 per ounce over the London spot price this week "although it can also get flat", Schubert noted. For the investment community, the interbank premium stands at $0.50.
| TIME | |||||
|---|---|---|---|---|---|
| Sydney | Tokyo | Ha Noi | HongKong | LonDon | NewYork |
| Prices By NTGOLD | ||
|---|---|---|
| We Sell | We Buy | |
| 37.5g ABC Luong Bar | ||
| 4,479.80 | 4,149.80 | |
| 1oz ABC Bullion Cast Bar | ||
| 3,716.00 | 3,396.00 | |
| 100g ABC Bullion Bar | ||
| 11,899.00 | 10,969.00 | |
| 1kg ABC Bullion Silver | ||
| 1,449.70 | 1,099.70 | |
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