BackGold discounts in India jump to highest in 10 months as prices hover near record highs
After posting a double-digit return in 2022, gold prices have continued it strong run in January.
PremiumGold discount in India jumped to highest in 10 months as record high prices hit domestic sales. Dealers last week offered discounts of as much as $42 an ounce over official domestic prices as compared to a discount of $24 in the previous week, Reuters reported. As India imports most of its bullion requirement, domestic prices include 15% import duty and 3% GST. February gold futures on MCX had risen to record high of ₹57,125 per 10 gram last week, before settling at ₹56,900 at the end of the week.
India's budget will be presented on February 1 and the industry has urged the government to cut import duty on the precious metal.
“The government hiked the import duty on gold to 15% in July 2022. The imports have fallen in a big way. The calendar year 2022 saw a dip in terms of imports- this was largely due to the rising gold prices coupled with a hike in import duty," said Colin Shah, MD, Kama Jewelry.
After posting a double-digit return in 2022, gold has continued it strong run in January. Gold prices have rallied nearly 3-4% in January month alone. As compared to November lows, it is up about 14%, primarily driven by weakness in the US dollar and softening of US bond yields. The recession fear in the West is providing strength to gold, says Mr Shah.
"Moving forward, we expect some more rally in gold prices. Domestically, Gold prices are expected to hit the ₹58,000-59,000 level. On the global front, the prices are likely to touch earlier highs and trade in the range of $2060-2100/oz," he added.
In global markets, prices today hovered near $1,928. Traders remained cautious ahead of Fed's two-day policy meeting scheduled on January 31-Febuary 1.
The Fed is widely expected to slowdown its pace of rate hike to 25 basis points (bps) from 50 bps announced in December. Low interest rates tend to benefit gold as it reduces the opportunity cost of holding bullion.
Recent economic data has been also supportive for the precious metal. Data released on Friday showed US consumer spending fell in December which could give the Fed more room to further slow the pace of its rate hikes. (With Agency Inputs)
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