Gold bullion trades at discount in India despite improved demand

By Anil Mathews (ScrapMonster Author)

April 22, 2016 08:02:59 AM

MUMBAI (Scrap Monster): Gold continues to be sold at a discount despite rise in demand. The demand for gold witnessed considerable improvement during the week, mainly on account of more number of retailers withdrawing from strike and reopening their shops. However, higher global prices for the yellow metal pushed the trade to discounts. However, discounts have dropped from previous week’s levels.

The jewellers in the country had been on a strike since the beginning of March, in protest against the introduction of sales tax on gold jewellery by the government. However, with the government reiterating that it will not revoke the tax soon, many jewellers have now started reopening their shops. This has led to improved gold demand among Indian customers. Though dealers noted that demand has improved over the previous week, it is lower than expected. Fresh gold purchases are impacted by higher gold prices, they said.

The Indian bullion market continued to trade at a discount. Meantime, discounts have dropped sharply when compared with the week before. The dealers were found offering bullion for a discount of up to $8 per ounce to global spot gold prices. This is significantly lower when compared with discount levels of up to $25 witnessed during the previous week. The discounts had hit record high of $53 per ounce during late-February as demand dropped to lowest level in history.

Traders expect that discounts are likely to narrow further during the forthcoming weeks. The market may trade at parity or at premiums by Akshaya Tritiya, which falls during early-May. Retail buyers are seen holding back their purchases, mainly because gold prices have rallied much during recent weeks. They expect the prices to cool off. The purchases are likely to pick up momentum with the advent of festive season in the country.