Tepid demand for gold is weighing on the yellow metal prices as the retailers are selling gold at a discount after the gold prices hit an all-time high last week.
Tepid demand for gold is weighing on the yellow metal prices as the retailers are selling gold at a discount after the gold prices hit an all-time high last week. While the international factors are supporting the gold prices, the domestic factors don’t seem to help the gold prices on account of delayed monsoon, time for the arrival of the festive season and high prices. Although the industry is demanding import duty cut, the experts don’t expect the government to cut import duty on gold prices as it doesn’t have enough leeway to go for a rate cut in view of revenue collection.
“Currently, the gold is trading at a discount of 7-8 dollars against the London Bullion Market Association or LBMA prices. The gold was trading at a premium of two dollars an ounce during Akshay Tritiya in May. With festive season due to arrive after August 15 and already high gold prices, the precious metal isn’t able to charm the consumers at this point in time. Also, this is not a wedding season, so there are very few customers for gold in the market,” Ajay Kedia, Director, Kedia Commodities told Financial Express Online.
Currently, the import duty on gold is being levied at 10 per cent. The industry has demanded a cut in import duty to the tune of 4 per cent from the current rate of 10 per cent. “Though the country’s trade deficit has narrowed down to 2.5 per cent of GDP in 2019, the GST collection is below Rs 12 lakh crore in FY19, so the government is unlikely to take a risk by reducing the import duty. The gold smuggling has also increased in the last six month. The government should take steps in stopping that,” Kedia further told.
Gold prices surged 1.05 per cent to Rs 34,400 per 10 gram in futures trade Wednesday. On the Multi Commodity Exchange, gold for delivery in August contracts rose by Rs 358, or 1.05 per cent, to Rs 34,400 per 10 gram in a business turnover of 17,270 lots. The October contracts were also trading higher by Rs 371, or 1.08 per cent, at Rs 34,620 per 10 gram in 6,753 lots. However, globally gold fell 1.53 per cent to USD 1,429.60 an ounce in Singapore.