Gold premium in India shoots up ahead of gold buying festival

NEW DELHI (Scrap Monster): The premiums on Gold in India shot to its highest level in two-and-a-half months. As per industry sources, the increased demand ahead of ‘Akshaya Tritiya’ gold buying festival and the scanty supplies of the yellow metal have caused the sudden jump in premiums. The premiums on gold bars surged more than 23% to $110 an ounce on London spot prices as against $89 an ounce seen earlier during the week.

According to jewellers, retail gold sale is likely to spike up in the country ahead of Akshaya Tritiya-the second biggest gold buying festival after Dhanteras. The anticipated increased demand has sent the premiums to higher levels seen during February earlier this year.

The official gold imports by the country have dried up following the government refusing to lift the tight curbs on gold imports. The flow of smuggled gold which so far had played a large role in bridging the demand-supply gap has also been hugely impacted due to increased vigil at airports and sea routes.

With the election code of conduct in place, the Election Commission has implemented various regulatory steps to combat black money and illegal money power. Gold traders in India are used to cash transactions while buying and selling gold. With election code of conduct coming into force, traders face severe restrictions on carrying physical cash in large denominations.

The scarcity of gold may keep the gold premiums at elevated levels. As per forecasts, the official gold imports by the country is likely to remain subdued during April and May, as a policy decision on relaxation of gold import norms is not expected before end-May.

Gold premiums elsewhere in Asia remained flat. The premium for gold bars in Hong Kong remained as low as $0.80 to $1.0 an ounce to London price. In Singapore, the premiums remained unchanged over the week at about $1 to $1.20 an ounce.