Gold on Saturday scaled an eight month high of $503.62 per 10 grams on strong buying trends after stocks and money markets melted. Gold rose by $11.06 to $501.67 in Kolkata, followed by Delhi where it gained $8.13 to $497.88 per ten grams, the levels last seen on December 18th last year. The prices of the yellow metal remained bullish despite an import duty hike on gold, silver and platinum by the government, the widening current account deficit had prompted the government to increase the import duty on gold and platinum from existing 8 percent to 10 percent, import duty on silver has also been increased from 6 percent to 10 percent. Confirming the action of the government, Revenue Secretary Summit Bose said the motive behind the hike in import duties for gold, silver and platinum was to curb imports of precious metals and check the current account deficit, this is the third increase in gold import duty this year.
In Chennai, gold climbed by $10.97 to $497.55 and in Mumbai by $9.94 to $495.09 per 10 grams. Traders attributed the sharp jump in gold prices to fear of tight supply following government decision to hike import duty of gold and silver to narrow the current account deficit. The buying sentiment got a shot in the arm as rupee hit record low of 62 against the dollar and investors shifting funds from melting equities to bullion supported the uptrend, traders said. The RBI also prohibited inward shipment of gold coins, medallions and Dores without a license.
Commenting on the uptrend in gold prices, Somasundram PR, World Gold Council’s (WGC) Managing Director told Reuters “Once the monsoon is over, rural incomes will rise and that will have its own impact on demand. There are also a lot more marriage and festival dates in October and November in the fourth quarter”
The rally in precious metals sparked ever since rupee plunged to an all time low, raising fears the dollar denominated metal would become costlier and restrict supply into the market after the RBI prohibited inward shipment of gold coins. “Melting equities and depreciating rupee have left no other option for the investor fraternity but to park their funds in bullion, “said Surender Jain, Vice President of All India Sarafa Bazaar.
Government, Traders at loggerheads
The hike in the import duty of gold and the shortage of gold has left the traders fuming, Haresh Soni, Chairman of All India Gems and Jewellery Trade Federation (JTF) said “We were working with the government to control the CAD, we appealed voluntarily to our jewellery traders to stop selling gold coins and bars, which bought the bullion’s sales to almost zero. But every time we tried to help the government, we got strict norms through increase in import duty. We are not going to bear the brunt now, we will protest the move and call on an indefinite strike, if need be, to raise our voice.
GJF is the apex body which monitors over 600,000 jewellery retailers in India.
Yellow Metal Remains Bullish