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You may have to shell out more for gold despite the price drop
Gold premiums in India, the world's biggest buyer of the metal, jumped sharply this week as the festive season began, driving up demand, and supply remained tight on a lack of imports.
Premiums to London prices jumped to $30 to $40 an ounce from last week's $5 to $7, the All-India Gems and Jewellery Trade Federation (GJF) said.
"There is no official gold available. People are not willing to sell their old jewellery either, at these prices," said Sudheesh Nambiath, an analyst with metals consultancy Thomson Reuters GFMS.
"Current availability is largely unofficial metal, which is being sold into market at a lower rate than the prevailing premium."
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You may have to shell out more for gold despite the price drop
Gold imports have virtually dried up in India. Battling a high trade deficit, the country has set the import duty on the precious metal at a record 10 percent.
It also introduced what is known as the 80/20 rule, requiring a fifth of all imports to be re-exported.
The confusion over how importing agencies would comply with the rule about re-exports effectively halted purchases for about two months.
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You may have to shell out more for gold despite the price drop
Following government clarifications, banks have begun to process fresh orders, but the rule will still inhibit imports.
"There have been some imports, so premiums should come down next week. Supplies should start picking up gradually," said Bachhraj Bamalwa, a GJF director.
India's gold imports dropped more than 95 percent, to 7.24 tonnes in September, from a record 162 tonnes in May.
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You may have to shell out more for gold despite the price drop
"There has been demand for a week now but our supply line has dried up," said Harshad Ajmera, proprietor of JJ Gold House, a wholesaler in Kolkata. "The suppliers are making huge money on the stock they have now."
Premiums in other parts of Asia remained stable, with dealers noticing a pickup in demand as spot gold prices fell below $1,300 an ounce.
"There was an increase in demand but no big rush," said one Singapore-based dealer.
"Unless local currencies strengthen further, we won't see huge demand. That would be the main factor to determine whether demand is good or bad," the dealer said.
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