Mumbai: Gold demand in India improved this week, boosted by a fall in prices overseas, although some consumers waited to see if hopes for an import duty cut in the government’s budget next week will be realized.
Global gold prices on January 27 hit a two-week low on a stronger dollar keeping the metal on track to record their first weekly loss since late December.
“Wedding season demand has improved. The price correction is also luring in customers,” said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in the eastern Indian city of Kolkata.
Dealers in India, the world’s second-largest consumer of the metal, were charging a premium of up to $2 an ounce this week over official domestic prices, unchanged from last week. The domestic price includes a 10 percent import tax.
“Few jewelers are delaying purchases expecting import duty cut in the budget, but some think this may not happen,” said a Mumbai-based dealer with a private bank.
The bullion industry has been urging a reduction in the duty to combat smuggling, which has increased since India raised import duty to 10 per cent in August 2013 in an effort to narrow a gaping current account deficit.
“The government is going to implement GST (Goods and Services Tax) this year. At the time of implementation, it may reduce import duty to adjust overall duty structure on gold,” said a Mumbai-based dealer with a private bank.
The trade ministry has requested the finance ministry to cut the import duty to 6 per cent, according to a senior government official. The Indian government will present on February 1 its budget for the 2017/18 financial year starting April 1.
In the local market, gold prices were trading around 28,150 rupees per 10 grams on Friday, after falling to 26,862 rupees last month, the lowest level since February 2, 2016.