Gold demand weak; lower supply helps premiums

Last Updated: Mon, Jul 01, 2013 11:56 hrs

Gold demand in India, the world's biggest buyer of the metal, remained subdued on Monday, though premiums were steady at last week's level as a ban on consignment imports dented supplies.

The RBI has banned banks, along with state-run and private trading agencies, from importing the yellow metal on consignment or on payment of margin basis, making it difficult for small jewellers to source supplies on cash payment. The government also hiked the import duty to 8 percent.

"Demand is less... there were a lot of purchases in April and May, and demand will begin in August," said Haresh Soni, chairman, All India Gems and Jewellery Trade Federation, adding "premiums are high because of short supply, all banks have stopped importing gold."

Most of the supplies are met by state trading houses and state-run agencies such as MMTC, STC and PEC through their imports in April and early May as banks are awaiting guidelines from the central bank on outright purchases.

Bullion dealers kept premiums steady at up to $20 an ounce on London prices, Soni said.

On the Multi Commodity Exchange (MCX), gold prices edged higher from their lowest level in nearly two years on global leads.

The actively traded gold for August delivery was 0.14 percent higher at 25,705 rupees per 10 grams at 4:55 p.m., after hitting a low of 24,830 rupees, a level last seen in late September 2011.

Global gold rose after posting its biggest quarterly fall on record, as the dollar steadied and equity markets eased ahead of U.S. economic data this week which should give more clues on the country's monetary policy.

Silver for July delivery on the MCX was 0.64 percent higher at 39,950 rupees per kilogram.

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