Indian gold dealers offer rare discount as demand weakens
What's the story
For the first time in nearly a month, gold has started trading at discounts in India. This comes as volatile prices have discouraged buying. Indian bullion dealers are now offering discounts of up to $12 per ounce on official domestic gold prices, which include 6% import and 3% GST levies. Last week, these were at a premium of up to $70.
Market trends
Retail buyers uncomfortable making purchases
Despite discounts on making charges, jewelry demand has not picked up. A Hyderabad-based jeweler said retail buyers are not comfortable making purchases at current price levels. Domestic gold prices were around ₹154,000 ($1,697.39) per 10gm on Friday after hitting a low of ₹133,687 last week. Bullion dealers and jewelers have largely stayed away from bank purchases, expecting the government to allocate some 80 metric tons of gold imports from UAE at concessional duty this month.
Trade agreements
Gold shipments from UAE attract lower import duties
Gold and silver shipments from the UAE attract lower import duties under the Comprehensive Economic Partnership Agreement (CEPA) between the two countries. In China, bullion traded at a discount of $8 to premiums of up to $10 an ounce above the global benchmark spot price this week, ahead of the nine-day Lunar New Year holiday starting on February 15.
Seasonal impact
Lunar New Year in China, other Asian markets
The Lunar New Year in China and other Asian markets is traditionally a strong period for physical gold demand. Independent analyst Ross Norman observed that "the year of the fire horse seasonally (sees) strong demand." He added, "My sense is that the very elevated prices have dampened demand reasonably significantly, but it still remains positive on the mainland."