To keep a lid on record trade deficit, India tied gold imports for domestic use to exports, helping cut imports available to the local market by 60 percent. The federal government has also hiked the import tax twice in 2013 to 8 percent.
"Supply is extremely bad, people are asking for high premiums," said Haresh Soni, chairman of the All India Gems and Jewellery Trade Federation, which has more than 40,000 members.
June imports fell nearly 81 percent to 31.5 tonnes from a record 162 tonnes in May, although Finance Minister P. Chidambaram said imports had risen again in July, but without giving any details.
India is hoping to contain gold imports well below 845 tonnes that were shipped last year, Chidambaram said. Traders are waiting to stock up the yellow metal ahead of a season of key festivals and weddings when gold buying peaks.
"It would be more chaotic once the season starts in August," said Soni. The actively traded gold for August delivery on the Multi Commodity Exchange (MCX) was 0.20 percent higher at 28,763 rupees per 10 grams, after hitting a high of 29,010 rupees, a level last seen on April 12.
Silver for September delivery on the MCX was 1.2 percent higher at 42,165 rupees per kg. The following were the prices of gold and silver in rupees as of 1315 local time in the spot market, quoted by Corporation Bank:Wednesday Tuesday 999/10 grams 27,328, 27,239 Silver .999/kg 41,214, 40,399.