Asia Gold: India discounts soar to record high on import duty hike; China premiums firm

Kitco Media
By Reuters
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Reuters
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May 15 (Reuters) - Gold discounts in India jumped to a record this week as a ‌sharp import duty hike slowed demand and triggered investor selling, while investment demand kept Chinese premiums firm.

Dealers in India quoted discounts of up to $207 an ounce over official domestic prices this week, inclusive of 15% ​import and 3% sales levies, up from the previous week's discounts of up to $15 ​an ounce and premiums of $6.

The sudden price rise prompted investors to sell, ⁠while jewellers and retail buyers stayed on the sidelines, said a jeweller based in Hyderabad.

Earlier ​this week, India raised import tariffs on gold and silver to 15% from 6%. The world's ​second-largest consumer of gold also tightened rules for duty-free gold imports for jewellery exports by capping imports at 100 kilograms per licence.

Domestic gold prices in India were trading around 160,500 rupees per 10 grams on Friday, after ​rising to 164,497 rupees earlier this week, the highest in more than two months.

Gold discounts ​jumped to unusually high levels as demand virtually disappeared and scrap supplies increased, said a Mumbai-based bullion dealer.

"Firmer ‌demand ⁠from China will likely counter India's weaker demand after the latter's policy changes," ANZ said in a note.

In top consumer China, bullion traded at premiums of $15 to $20 an ounce over the global benchmark price, largely in line with last week's premiums of $14 to $20.

Premiums remained steady this ​week, supported by resilient ​investment demand and aggressive ⁠industrial buying, said Bernard Sin, regional director of Greater China at MKS PAMP.

"Import restrictions remain a key constraint, though loosening is widely anticipated ​soon. Industrial stockpiling by solar and electronics firms is particularly aggressive, ​amplified by ⁠the removal of VAT (value-added tax) export rebates," he said.

Spot gold prices have declined 2.8% so far in the week, as higher energy prices fuelled inflation concerns and reinforced expectations of prolonged higher interest ⁠rates.

In Hong ​Kong, gold traded at par to premiums of $2, while ​in Japan , gold was sold at a discount of $0.50. In Singapore , gold was sold at premiums of $1 to $3.30.

($1 = 95.94 ​Indian rupees)

Reporting by Rajendra Jadhav in Mumbai and Noel John in Bengaluru; Editing by Subhranshu Sahu

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