Editor’s Note
India’s gold discounts hit record highs this week as a sharp import duty hike dampened demand and spurred investor selling, while China’s sustained investment appetite kept premiums firm.
India’s gold discounts surged to record levels this week following a sharp increase in import duties, which dampened demand and triggered investor selling, while sustained investment demand in China kept gold premiums firm.
Indian dealers offered discounts of up to $207 per ounce over official domestic prices this week, inclusive of the 15% import duty and 3% levies. This marked a sharp reversal from the previous week, when discounts were capped at $15 per ounce and premiums reached up to $6.
The sharp price increase prompted investors to liquidate holdings, while jewelers and retail buyers largely refrained from purchases. Earlier this week, India raised import duties on gold and silver to 15% from 6%. Authorities also tightened rules on duty-free gold imports meant for jewelry exports by limiting imports to 100 kilograms per license.
Domestic gold prices in India were trading around 160,500 rupees per 10 grams on Friday. Prices had climbed to 164,497 rupees earlier in the week, marking the highest level in over two months.
The widening discounts reflected weakening consumer sentiment in the world’s second-largest gold consumer market following these policy changes.
ANZ analysts said stronger demand from China could offset the weakness in Indian demand after the duty increase.
In China, the metal traded at premiums of $15 to $20 per ounce over global benchmark prices, largely unchanged from last week’s premiums of $14 to $20. Bernard Sin, Greater China regional director at MKS PAMP, said premiums remained stable due to resilient investment demand and strong industrial buying activity.
Sustained industrial demand helped support Chinese premiums despite broader weakness in global metal prices.
Spot gold prices have fallen 2.8% so far this week, as rising energy prices fueled inflation fears and reinforced expectations that interest rates could stay higher for longer. Market sentiment was also influenced by gains in U.S. stocks. On Thursday, the Dow and S&P 500 both rose about 0.75%.
In other Asian markets, premiums remained relatively modest. In Hong Kong, gold traded between flat and premiums of $2 per ounce. In Japan, the metal was sold at a discount of $0.50 per ounce, while in Singapore, gold traded at premiums ranging from $1 to $3.30 per ounce.