Author: Paul Ploumis07 Apr 2014 Last updated at 08:29:59 GMT
MUMBAI (Scrap Monster): The decision by the Reserve Bank of India (RBI) to grant gold import license to five private sector banks saw gold premiums tumbling by nearly 70% during last week.
In a bid to narrow down rising Current Account Deficit (CAD), the country had raised the import duty on gold to 10% during 2013. Further it made mandatory for all exporting houses and agencies to re-export one-fifth of the imported gold as finished products. Despite repeated demands from the industry body, government has not yet lowered the high gold duty structure.
However, as the first sign of relaxation of tight gold curbs, the RBI allowed five more banks from private sector to import gold, thereby making more gold available in market. GJF forecasts the monthly gold shipments by the country to double to almost 50 tons in March ’14 from 25 tons during Feb ’14. Consequent to the RBI announcement, the premium on the yellow metal plunged from $85 per ounce to $25-$30 levels per ounce.
According to Bachhraj Bamalwa, Director, All India Gems and Jewellery Trade Federation (GJF), the premiums are likely to fall back to normal levels of $1-$2 per troy ounce over the London prices in the event of further gold import relaxations.
The world’s largest elections have begun in India. Industry sources believe that the new government which comes to power post general elections will act swiftly to lift the curbs on gold imports. The ruling party in India has already stated that revision of gold import norms will be taken up following the elections. Also, the main opposition party in India has also announced that any action on gold should look at the interests of the public and traders, not just economics and policy.