Gold delivery premium halved as prices fall * Premium of $120 a week before Diwali is down to $60-70 per ounce, or Rs 1,200 per 10 grams With a nearly 5 per cent fall in gold prices, premiums that were quoted for getting physical delivery of the yellow metal have crashed by half. Premium of $120 prevailing a week before Diwali has come down to $60-$70 per ounce (Rs 1,200 per 10 grams) in the Mumbai market. Traders say during Diwali days, smuggled gold was sold in a big way in the market and this led to fall in spot premiums and effectively fall in prices. This was done to attract buyers as the premiums fell at a time when international prices were also falling. In effect fall in gold price in Indian market is more than the fall in international market in last fortnight despite rupee depreciation. At one point, a day before Diwali, premiums were quoted at $30 per ounce, but that didn’t sustain and have risen again. Today also gold price in Mumbai’s Zaveri Bazar gold price went up by Rs 10 per 10 gram to close at Rs 30,790 against yesterday night’s 1.5 per cent fall in gold in international market after US announced strong job data. This explains premiums are still high in India. The premiums are still quoted high becaus official imports are still very slow. In October, 23 tonnes of gold were imported in the country of which 13 tonnes were imported by exporters while only 10 tonnes arrived in the domestic market, according to trade estimates. As per the 80:20 norm for gold imports spelled out by the Reserve Bank Of India (RBI), out of 100 tonnes of imports, maximum 80 tonnes can be used sold in the domestic market and hence October import data suggest that against 13 tonnes of import for export purpose, 52 tonnes could have been imported for the domestic market, but that has not happened. Jewellers say that domestic demand is much lower restricting imports. However the commerce ministry has sensed pick up in the export activity as unusual and has called a meeting of all stake holders on Monday to discuss the export scene and measures to tighten norms. There are reports that round tripping of gold has resurfaced again. Exporters are said to be exporting gold chains for which manufacturing doesn’t cost much. Those exporters indulging in are selling it at loss according to industry insiders, but they make money by importing some gold for domestic market which is sold at 5 per cent premium due to premium prevailing for delivery. Ministry has taken note of such reports and hence called a meeting where stringent value addition norms for exports are likely to be proposed. At present an exporter is required to add at least 3 per cent value for exporting gold jewellery which now may be increased to 5 per cent and another proposal is to reduce allowable wastage. When gold is converted in jewellery, some wastage takes place which is deducted while calculating value addition. Currently 3.5 per cent is allowed but a little less that is 2.5 wastage is sufficient for genuine exporters. Government’s proposal in this regard is not known.
Posted on: Sat, 09 Nov 2013 13:57:06 +0000
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