Editor’s Note
This article explains the recent shift in India’s gold market, where prices have moved from a sustained premium to a discount due to volatile trading and weakened retail demand.
Gold had been selling at a premium in India for nearly a month, but the picture changed suddenly this week. Due to sharp price fluctuations, retail buyers retreated. This weak demand forced bullion dealers to offer gold at a discount compared to domestic prices.
This week, gold in India was offered at a discount of up to $12 per ounce. This discount is relative to domestic government prices, which include a 6% import duty and a 3% sales tax. In contrast, just last week, the same gold was selling at a premium of around $70 per ounce.
Jewelers say that despite offering discounts on making charges, jewelry demand has not improved. Customers are not comfortable buying at the current high prices. In a very short time, prices rose from around ₹1.33 lakh to approximately ₹1.54 lakh per 10 grams, making people fear that prices could fall again.
On Friday, February 13, gold in the domestic market hovered around ₹1.54 lakh per 10 grams. Just a week earlier, prices had slipped to around ₹1.33 lakh per 10 grams. This sharp market turbulence has weakened the buying sentiment.
According to traders, many jewelers and dealers have temporarily halted new purchases from banks. The reason is the expectation that the government may approve the import of about 80 metric tons of gold from the UAE at concessional duty rates this month. Under the India-UAE trade agreement, gold imported from there attracts lower import duty. This has raised hopes of cheaper future supply.
In China, ahead of the Lunar New Year, physical gold traded from a discount of $8 per ounce to a premium of $10 per ounce. Seasonal demand for jewelry and gifts during the holidays there typically remains strong, so demand persists.
He also stated that the People’s Bank of China is continuously increasing its gold reserves at a limited pace, and jewelry consumption remains sustainable.
In Hong Kong, gold traded from parity to a premium of about $1.80 per ounce. In Japan, it ranged from a $6 discount to a $1 premium, while in Singapore, gold stayed within a range of a $0.50 discount to a $3.50 premium.
Inflationary pressure, geopolitical risks, and central bank purchases continue to support it.
He added that short-term correction and profit booking may continue, but the long-term picture is positive.
