From discounts, gold prices in India swing to premium

Market


Despite new coronavirus restrictions, gold dealers in India charged a premium of up to $1 an ounce over official domestic prices this week, as compared to $5 discounts in the previous week, according to news agency Reuters. India is the world’s second biggest gold consumer after China and domestic prices include 10.75% import and 3% GST. 

On MCX, gold futures settled the week at 47455 per 10 gram while silver at 60,667 per kg. According to dealers, local curb due to rising cases of coronavirus could reduce gold demand in the short term. 

In 2021, India spent a record $55.7 billion on gold imports, buying more than double the previous year’s tonnage as a price drop favoured retail buyers amid pent-up wedding demand.

In global markets, gold edged higher to settle near $1,800 per ounce after data showed U.S. jobs growth was slower than expected last month. 

In the US, data released on Friday showed nonfarm payrolls rose by 199,000 jobs last month amid worker shortages, lower than a forecast of 400,000, with moderate job gains expected in the near term as spiralling COVID-19 infections disrupt economic activity.

Analysts said that a stronger than expected print was more likely to have pressured prices lower, but a weaker print has not significantly altered market rate hike expectations. Gold has been under pressure in recent days as bond yields hardened after release of Fed minutes boosted expectations of a earlier than expected rate hike from US Fed. 

The Fed minutes released on Wednesday showed officials had discussed shrinking the central bank’s overall asset holdings and raising rates sooner than expected to fight inflation. 

Gold is sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.

Meanwhile in India, the issue price for the next tranche of Sovereign Gold Bond Scheme 2021-22, which will open for subscription for five days from Monday, has been fixed at 4,786 per gram. The Sovereign Gold Bond Scheme 2021-22 – Series IX will be open for subscription for the period from January 10-14, 2022.

The Government of India, in consultation with the Reserve Bank, has decided to offer a discount of 50 per gram less than the nominal value to those investors applying online and the payment against the application is made through digital mode. For such investors, the issue price of gold bond will be 4,736 per gram of gold. (With Agency Inputs)

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