Gold premiums in India plunged on Thursday on a jump in supplies of scrap and as jewellers expect a surge in imports from next week after the government clarified overseas buying rules.
Indian importers are examining fresh guidelines from the customs department issued on Wednesday before shipping any new lots, and want to make sure the new imported lots do not meet the same fate as the stock that is stuck at the airport due to a lack of clarity on rules.
Premiums are down $25-30 an ounce on London prices as against $35-40 an ounce earlier in the week, said Haresh Soni, chairman of All India Gems and Jewellery Trade Federation.
"Due to yesterday's circular, people are expecting consignments will start soon. Scrap is increasing every day as people are reselling jewellery which was bought at 28,000 rupees," said Soni, giving reasons for the fall in premiums.
The Reserve Bank of India, in a bid to help the government stem the tide of gold imports which had pushed the current account deficit to a record high, told importers on July 22 that a fifth of their purchases would have to be turned around for export.
Most of the jewellers are sustaining on stocks that were shipped from April to May, which totalled more than 300 tonnes.
"...the (import) situation should improve up ahead - albeit from a very low base - as we are now stepping into the strongest seasonal period for India. Given this year's good monsoon, better farmer incomes would help the gold buying potential," said Joni Teves, precious metals analyst at UBS, in a note to its clients.
India's wedding and festival season, when consumers buy the yellow metal for auspicious reasons, will start in November and taper off in January, .
At 1706 IST, the actively traded gold for October delivery on the Multi Commodity Exchange (MCX) was up 0.42 percent at 32,741 rupees per 10 grams, after hitting a low of 32,215 rupees earlier in the day.
The gap between spot and futures will decrease, as availability increases, said Soni.