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India gold premium to double on demand surge during holiday

The gold premiums in India are likely to double from current levels, ahead of festive season demand starting early next week. The country’s gold imports too are expected to rise significantly during this period. The surge in gold demand is likely to support global bullion prices which are currently at 8.5 months low.
According to India Bullion and Jewellers Association (IBJA), the monthly gold imports by the country are set to rise by nearly 50% to about 70 to 75 tonnes during last quarter this year. The country’s gold imports had averaged at 50 to 60 tonnes during June to August this year.
Gold sales are expected to rise by nearly 20% during the festive season. Weak prices may ignite more buying activity. Consequently, premium on gold in the country may surge to almost double from the current levels of $7 to $10 per Oz to as high as $12 to $15 per Oz.
The festive season in India is about to commence next month with the advent of Dhanteras- considered by Indians as the most auspicious occasion for purchasing gold, in early-October. This is followed by Diwali-the festival of lights towards end-October. The month of October also marks the beginning of wedding season in the country which will extend until early next year.

The late pick-up in monsoon across the country has already lifted the rural gold trade in the country. Meanwhile, the government fears that higher gold consumption may lead to elevated gold imports. This in turn could negatively impact the current account deficit (CAD) situation. It is in this context that a senior government official commented yesterday that the government has no intention whatsoever to relax the 80:20 gold import norm in immediate near term.

Source:Scrap Monster

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