Gold prices soften in early noon trade

MUMBAI: Gold prices softened in India around noon, reflecting the fall in the precious metal’s price in New York as the dollar firmed up. Strengthening of the rupee also exerted pressure on gold prices in the local market. Demand remains tepid due to curbs including high import duty and steep premium charged by banks.

The yellow metal traded at Rs 29,860 per 10 gm on Tuesday noon, down Rs 40 from Monday’s closing. The international price was $1,291, down nearly $4 per troy ounce from the previous day’s close.

According to traders such as Gnanasekar Thiagarajan, director of commodity research outfit Commtrendz, gold prices have been propped up of late by the ongoing turmoil in the former Soviet republic of Ukraine in the face of an appreciating greenback.

“India imported about 135 tonnes of gold in the calendar year through April, which is way below the 142 tonnes it imported in April last year alone. The 10% import duty and curbs like linking import availability to exports under the 80:20 scheme have led to a paucity of the metal in the local market and banks charging a hefty premium,” said Kumar Jain, a local jeweller in Mumbai’s Zaveri Bazaar gold market.

The higher cost in the local market can be gauged by the discount that MCX’s near month future traded at around early noon to the spot rate. The difference including VAT is Rs 1,014 per 10 gm. Earlier, when physical demand used to be high, the discount range from Rs 150-200. The widening discount now underscores the high premiums being charged in the local market due to relative non-availability of the metal.

However, Jain said traders in the gold market were optimistic of the incoming BJP-led government coming to the industry’s aid and halving import duty. The UPA government imposed import curbs to tame the high current account deficit which played havoc with the rupee a year earlier.