27-May-2013
NEW DELHI—Premiums for imported gold in India have halved from near-record levels last week, reflecting higher volumes being channeled through banks after a new import rule temporarily disrupted supplies to the world's largest gold consumer.
The central bank's recent move to tighten easy availability of credit for importers combined with a surge in bargain hunting in India since prices fell to two-year lows in mid-April had caused a supply shortage.
The supply squeeze had prompted importers to pay premiums of between $10 and $15 an ounce to international bullion suppliers—about three times the usual level during times of peak demand—to speed up deliveries.
However, premiums have dropped to $5-$7 an ounce this week, said Ketan Shroff, director at Penta Gold Pvt. Ltd., a Mumbai-based bullion dealer.
The lower premiums will benefit Indian consumers, as the higher cost of imported gold is usually passed on to them. Most Indian consumers have been willingly paying the extra money, as their total cost was still far less than three months ago.
India's government allows gold imports only through a handful of designated state-run banks and a clutch of state-backed and private trade agencies.
Until two weeks back, companies could place gold import orders with one of the designated banks by paying a margin up front and the balance on delivery.
Subsequently, the Reserve Bank of India changed the rule, as easy availability of credit had encouraged speculative imports, leading to a larger outflow of dollars that has weighed on the local rupee currency.
The change had caused a temporary shortage, as importers took time to switch over to making upfront payments.
The drop in premiums may also be due to waning wedding-season demand that ends mid-June.
"Most of the buying for weddings is done a week to a two weeks in advance. We are likely to see more demand now from last-minute shoppers," said Ashish Mundhra, director of Mundhra Bullion, a large southern India-based private bullion dealer.
Gold purchases also start tapering off from mid-June as farmers save money to plant crops during the annual monsoon season.
Source:-online.wsj.com
No comments:
Post a Comment