Premium on gold has disappeared since the beginning of this month even as banks and nominated agencies are importing the precious metal in limited quantities, indicating that jewellers have unsold gold with them and demand has slowed since the GST regime was rolled out on July 1. In the last week of June, dealers were charging a premium of up to $ 10 an ounce over official domestic prices, the highest since the middle of November 2016.
There are three reasons for the disappearance of premium on gold, said industry executives. First, rural demand has fallen to less than half as kharif sowing has picked up across India with the onset of monsoon.
Second, in urban India there are few buyers of jewellery now as the wedding season is yet to arrive. Investment demand for gold in urban India is expected to be met by the sovereign gold bonds 2017-18 (series-II) launched on Monday.
Surendra Mehta, national secretary, India Bullion and Jewellers Association said, “Ample im ports took place before June 30, that is in the VAT regime. That volume is good enough to meet the demand.” India’s gold imports in terms of quantity in the first half of 2017 crossed the enti re imports of 2016. Although physical demand for gold dwindled since 3 per cent GST was introduced, the industry expects the new tranche of so vereign gold bonds to fare well.
Shekhar Bhandari, business head (global transactions and precious metals) at Kotak Mahindra Bank said, “The issue price is fixed at 2,780gm of gold, ` which is 2 per cent less than the prevailing market price. Additionally, whoever subscribes for sovereign gold bond will not have to pay 3 per cent GST, as it is paper gold.”