Chennai: Gold is available at a discount of $23 - $25 per ounce in the bullion market as there are very few takers for the yellow metal imported through the official channel since the government hiked import duties. Traders expect gold imports to have dropped to 10 -20 tonnes in July.
Usually gold is available for a premium or discount of $2 to $3 an ounce depending upon the dynamic supply-demand situation. However, after the government increased the duty from 10 per cent to 12.5 per cent, the demand for the officially imported yellow metals has almost vanished in the bullion market, said Suresh Hundia, former president of Bombay Bullion Association.
“When gold is available in the grey market, buyers do not want to pay duties for the same. After the Budget, the discount was around $16 per ounce and now it has moved up to $23 - $25 per ounce,” he said.
According to P R Somasundaram, managing director, World Gold Council India, the discounts had started moving up when gold had hit $1400 in the international market.
“Supply of gold in the market is much higher than the demand. Since Q1 2017, the supply through various channels, including import of refined gold, dore imports, smuggled gold and recycled gold, has been going up. By now, there is an excess supply of 200 tonnes of gold in the market,” he said.
In the coming months, traders and jewellers will de-stock this excess supply. They will be able to offer gold to the customer for a discount as it was procured for a lower import duty. This de-stocking will probably go on during the festive season and hence the imports in the second half will remain low, he added.
“Even in July, the country would have officially imported not more than 10 to 20 tonnes,” said Hundia.
The duty hike will also see 20 to 25 per cent rise in the quantum of gold smuggled in. Currently on an annual basis, 95 to 100 tonnes of gold is smuggled into the country, said Somasundaram.
