NEW DELHI: The premium for gold in India was effectively unchanged this week against the backdrop of a weaker rupee, although inventories are set to increase – there is speculation that imports will exceed 100 tonnes in August.
The premium in Ahmedabad/Mumbai was quoted at $1.00-$2.00 per ounce above the London spot price on .995 gold, traders in India told FastMarkets.
This is slightly lower than last week but a weaker rupee – at its lowest in around two years against the dollar at 67.03, not far from all-time lows at 69.22 – has nudged the local price of gold higher.
The greenback has also picked up some of the slack of recent weeks to reach around 1.13 against the euro, putting downward pressure on many emerging-market currencies.
Still, much more than 100 tonnes of gold have been imported in August so far, according to sources – dealers and fabricators are stocking up ahead of the fast-approaching festival season, which kicks off early next month.
Inventories were already high following the removal of the 80:20 legislation in November, which prompted a rise in imports – refiners capitalised on a better environment for sourcing semi-pure doré bars with average purity of 80-85 percent, according to Metals Focus.
Around 95 tonnes of gold were imported in July after 55 tonnes in June, 62 tonnes in May, 81 tonnes in April and 131 tonnes in March, with extremely high import figures also recorded towards the end of 2014.
There was already the impression that bullion dealers and jewellers across the country were collectively holding as much as 100 tonnes of gold – mostly by dealers. Some of the country’s larger banks have denied this, though.
A good monsoon season so far has also bolstered sentiment. The domestic agricultural sector accounts for as much as 60 percent of gold demand – farmers use gold as a primary store of wealth because they have limited access to the formal banking system.
In Dubai, many dealers had been moving material out of the Emirates to meet the uptick in demand from India, resulting in a rare shortage of metal in one of the region’s largest consumers.
But the premium has normalised while dealers restock, with local sources pegging the local price on four-nines gold at around $0.50 over the London spot price and slightly less on .995 metal.
The premium for gold in China has also stabilised after a spike in volatility in the previous weeks. The premium in Shanghai remains at $2-3 over the London spot price, with demand said to have improved following interventions from the Chinese central bank.
