Mumbai: Gold premiums in India are expected to fall from current levels of about $30 an ounce, after the Reserve Bank of India (RBI) indicated it is considering removing some of the curbs to trade that have crippled imports.
India has also imposed a record 10 per cent import duty on the metal and claimed that a fifth of all shipments should be re-exported as finished product to help narrow its current account deficit (CAD).
But the recent easing of the CAD has given Finance Minister P. Chidambaram and the Head of the Central Bank, Raghuram Rajan, the space to consider lifting the restrictions on gold. "I think what we have to do is slowly and steadily take actions to remove some of these curbs," Reserve Bank of India (RBI) Governor Raghuram Rajan told analysts on Wednesday.
"Premiums will come back to normal, it may range between $1-2 an ounce," said Bachhraj Bamalwa, Director with All India Gems and Jewellery Trade Federation (GJF).
"People who have been on the sidelines due to high premiums will come back into the market," he said.Bullion prices in India hit a record of $160 an ounce to London prices in December of last year.
GJF's Bamalwa stated that the government could lower the amount of gold that had to be re-exported to increase supplies in the domestic market.
RBI also allowed five private banks including HDFC Bank and Axis Bank to import the metal, in what many saw as a first step towards an easing of the tough restrictions on gold trading. Bulk gold users in India are also hoping that the next government, widely expected to be formed by the Bharatiya Janata Party (BJP), will move swiftly to remove the gold curbs.
BJP's prime ministerial candidate Narendra Modi has said that any action on gold should look at the interests of the public and traders, not just economics and policy.
Any major move on gold policy is likely to be decided only by early June, after the full-year CAD figures are known and a new government takes the reins in New Delhi.
