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Huge premium on gold in India as government tries to destroy the industry
Gold at a Huge Premium as Imports Dry Up;
Survival of Small Jewellers at Stake
By Sutanuka Ghosal
The Times of India, Mumbai
Wednesday, July 3, 2013
http://economictimes.indiatimes.com/markets/commodities/gold-at-a-huge-p...
KOLKATA -- India's gold imports in June are estimated to have fallen drastically to 35-40 tonnes, less than a quarter of what the purchases in May were because of state restrictions, triggering a sharp rise in premiums in the local market and raising a question mark on the survival of small jewellers.
The acquisition cost of the yellow metal has shot up as bullion dealers are now charging a premium of up to Rs 350 per 10 grams over and above the metal's international price, up from only Rs 40 two weeks ago.
The premium, along with the increase in landed price of gold because of the rupee's depreciation, has denied Indian buyers the benefit of the fall in international prices last month.
... Dispatch continues below ...
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in Chicago, Vancouver, and Scottsdale
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http://www.jsmineset.com/2013/06/13/chicago-vancouver-and-scottsdale-qa-...
Dealers said they were paying a premium which was being passed on to jewellers. "This has made the yellow metal costly in the Indian market. The rupee has also played a crucial role in increasing the landed cost of the yellow metal," said Mukesh Kothari, director at Riddisiddhi Bullions, which is thinking of doing away with gold coin and bar sale in order to check the investment demand for gold.
"Imports have come down drastically in June," said Harmesh Arora, director, Bombay Bullion Association.
Dealers said imports in June are likely to fall to 35-40 tonnes in June from a record high of 162 tonnes in May when the Akshyay Trititya festival boosted demand. In the Mumbai market, the spot price of gold was hovering around Rs 26,230 per 10 gm. The price would have been Rs 25,930 per 10 gm if the premium was less. The international price of gold was at $1,260 per ounce.
"It is becoming increasingly difficult to get supplies. Most banks have stopped importing gold which has created a supply shortage in the Indian market. Bullion dealers are offloading gold that they stocked during April and May at a high premium," said Bachhraj Bamalwa, director of Nemichand Bamalwa & Sons.
In a bid to contain the record current account gap, the government banned consignment imports, making it difficult for smaller jewellers with a lower working capital to source supplies.
The government also raised the import duty to 8%, which made acquisition of gold costlier for the trade. Most of the supplies in the Indian market are now being met by privately-held trading houses and state-run agencies such as MMTC, State Trading Corp. and PEC through imports in April and early May as banks are still waiting for guidelines from the Reserve Bank of India on outright cash purchases.
C. Vinod Hayagriv, managing director of C. Krishnaiah Chetty & Sons, said, "The need of the hour is to stop bullion sales to unregistered bullion dealers rather than tighten the noose around the entire employment-generating value-added gems and jewellery sector."
Bamalwa said that if situation does not improve in the next fortnight, the survival of a large number of unorganised players will be at stake. "Nearly 3.5 crore people are attached to this trade and their jobs now hinge on the government's move," he said.
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