Gold prices have tumbled more than Rs. 800 per 10 gm in the past four trading sessions through Wednesday intraday after the RBI eased restrictions on the trade.
On the other hand consumers and jewellers are not rushing to buy the precious metal as they expect prices to fall further. They widely look forward to a reduction in import duty, which at present is 10%.
The RBI has allowed more entities to import gold and lifted a year-old ban on banks to give gold on lease, making it easier for the gold trade, which has been against the restrictions that were imposed when India’s current account deficit was widening alarmingly.
On Wednesday, the intraday spot price of gold was ` Rs.27, Rs.330 per 10 gm, down 3.1% from a week ago. As said by Jewellers like Rajeev Sheth, CMD of the listed Tara Jewels, order placement had slowed amid speculation in markets of a likely cut in import duty, currently at 10%.
Also, Joy Alukkas, CMD of Kerala-based eponymous jewellery outfit, said jewellers preferred to “wait and see” whether the new NDA government cuts the high tariff -which market circles hold responsible for the surge in smuggling -before placing orders.
RBI’s attempt to allow star and premier trading houses to import gold, in addition to certain banks and agencies like MMTC, has pushed down premiums these entities charge to customers from 5-6% to 2-3%, said Manish Jain, MD, Panna lal Mahesh Chandra Jewellers, based in Delhi’s Chandni Chowk area.
This has made gold in the local market easy on the pocket. Now, there are expectations of a cut in import duty, he added.
The futures price of gold on Wednesday bore out market expectations of the metal becoming cheaper.
On Wednesday, at 4 PM, the August gold contract on MCX traded at Rs. 26,213 per 10 gm, or an almost 3% discount to the June gold contract rate.
“The futures market indicates that traders on Wednesday expected the gold price to decline in August from current levels,” said Suresh Nair, director, ADMISI Commodities.