Gold premiums in India fall sharply as Covid hits retail demand

Premiums on gold over official domestic prices in India dipped this week amid faltering demand, Reuters reported. Rising prices and strict restrictions to contain the spread of Covid infections have hurt gold demand. Premiums this week eased to about $2 an ounce over official domestic gold prices as compared to last week’s $4, the report said.

Gold prices in India include 10.75% import duty and 3% GST.

Jewellers have been reducing purchases because of weak retail demand and demand could remain soft over next few weeks amid rising covid cases, a Mumbai-based dealer told Reuters.

On Friday, gold futures on MCX settled at ₹47,560 per 10 gram. Though prices are off sharply from ₹48,400 hit earlier this week, the precious metal is up ₹3,600 so far this month.

“A softer US dollar, falling Treasury yields and a correction in equities attracted investor interest in bullion. Concerns over the fiscal impact of the second wave of corona pandemic also helped to gain momentum. Meanwhile, signs of economic recovery in key economies are likely to dent major gains in the commodity,” said Hareesh V, Research Head Commodities at Geojit Financial Services.

In international markets, spot gold fell to $1,770.04 an ounce on Friday.

“As long as gold rates stay above $1765, the buying momentum is likely to continue towards the next upside obstacles of $1820 or more. A close below $1720 is a sign of immediate trend reversal,” said Hareesh V.

Many analysts remain positive on gold, saying that safe-haven inflows due to the pandemic, the likelihood of rising inflation and lower interest rates for longer could support the precious metal on lower levels.

Courtesy: Live Mint